BANKING  IN  IOWA 


^^2  6  // 


COPYRIGHT  1922  BY 
THE  STATE  HISTOBICAL  SOCIETY  OF  IOWA 


t^^-^-v- 


THE  HOMESTEAD  PRINTING  CO. 
OES   MOINES 


EDITOR'S  INTRODUCTION 

While  Iowa  has  more  banks  than  any  other  State 
in  the  Union,  there  is  nothing  unusual  in  the  banking 
history  of  this  Commonwealth:  the  record  here  is 
closely  paralleled  in  other  jurisdictions  during  the 
same  period.  Thus  the  history  of  banking  in  Iowa 
from  1838  to  1921  offers  to  the  student  a  cross-sectional 
view  of  the  history  of  banking  throughout  the  nation. 

The  author's  training  in  economics,  his  experience 
in  teaching  the  subject  of  banking,  and  his  first-hand 
knowledge  of  Iowa  economic  conditions  have  made  it 
possible  for  him  to  handle  a  difficult  undertaking  in 
a  most  satisfactory  manner. 

Benj.  F.  Shambaugh 

OmcE  OF  THE  Superintendent  and  Editor 

The  State  Historical  Society  of  Iowa 

Iowa  City    Iowa 


49^50' 


AUTHOR'S  PEEFACE 

In  the  pages  that  follow  the  author  has  undertaken  to  give 
a  history  of  banking  in  Iowa  from  the  earliest  settlement  to 
the  present  time.  Obviously  many  details  had  to  be  omitted 
in  order  to  keep  within  the  bounds  of  a  single  volume.  More- 
over, the  information  for  certain  periods  and  phases  of  the 
subject  was  very  incomplete.  Nevertheless  it  is  believed 
that  sufficient  data  have  been  presented  to  give  a  true  record 
of  Iowa's  banking  development.  Special  attention  has  been 
given  throughout  to  legislation  in  regard  to  banking,  since 
the  laws  enacted  represent  the  popular  sentiment  toward 
banks  and  their  control. 

The  field  covered  includes  more  than  simply  those  insti- 
tutions which  technically  speaking  can  be  called  banks.  In 
the  recent  Federal  Farm  Loan  Case  the  Supreme  Court  of 
the  United  States  announced  a  broad  definition  of  banking 
in  these  words :  '  *  Speaking  generally,  a  bank  is  a  moneyed 
institution  to  facilitate  the  borrowing,  lending  and  caring 
for  money. "  Under  such  a  liberal  definition,  practically  all 
institutions  making  up  the  financial  organization  of  the  State 
could  be  comprehended.  This  study  does  not  claim  to  be 
all-inclusive,  but  it  does  cover  a  broad  field :  it  includes  com- 
mercial banks,  savings  banks,  fiduciary  institutions,  invest- 
ment banks  of  various  classes,  farm  mortgage  companies, 
industrial  loan  institutions,  building  and  loan  associations, 
and  various  other  special  types  of  financial  institutions. 
The  Iowa  Bankers  Association  also  receives  considerable 

ix 


X  AUTHOR'S  PREFACE 

attention.  To  some  of  these  institutions  the  use  of  the  word 
bank,  or  any  of  its  derivatives,  in  the  formal  title  is  ex- 
pressly prohibited.  Banks  or  financial  institutions  in  Iowa 
operating  under  Federal  law  are  included  in  the  treatment. 
Thus,  there  is  considerable  discussion  of  institutions  not 
peculiar  to  Iowa;  this  seemed  necessary  for  the  benefit  of 
readers  not  familiar  with  the  general  banking  history  of  the 
United  States. 

During  the  formative  period  of  American  banking,  prior 
to  the  Civil  War,  Iowa  can  not  be  said  to  have  contributed 
any  distinctive  type  of  banking  institution  or  control.  Its 
banking  history  presents  rather  a  cross  section  of  the  his- 
tory of  banking  in  the  nation.  Wildcat  banking,  prohibi- 
tion of  banking,  a  free  banking  law,  and  a  State  bank  were 
all  found  in  Iowa  in  this  first  epoch. 

In  the  development  since  the  founding  of  the  national 
banking  system,  the  experience  of  Iowa  has  paralleled  that 
of  the  other  Commonwealths. 

Perhaps  the  most  distinctive  feature  of  the  banking  situa- 
tion in  Iowa  at  the  present  time  is  the  large  number  of 
banks:  indeed,  Iowa  possesses  more  banks  than  any  other 
State  in  the  Union.  Some  reasons  for  this  unusual  develop- 
ment and  the  results  thereof  have  been  given  in  Chapter 
XIV.  Iowa's  banking  history  is  of  special  interest  also 
because  the  majority  of  the  banks  are  strictly  country  banks 
and  their  business  is  actually  agricultural  credit.  The 
regular  banks  do  not,  for  the  most  part,  loan  on  farm  mort- 
gage security  but  confine  themselves  to  short  time  loans. 
Farm  mortgage  banking,  therefore,  has  had  an  unusual 
development  within  the  State.  Here  owing  to  the  absence 
of  a  large  industrial  population  special  types  of  industrial 


AUTHOR'S    PREFACE  xi 

loan  organizations  have  not  spread  widely.  Investment 
banking  is  also  somewhat  less  prominent  than  in  many 
States — unless  the  special  farm  mortgage  companies  are 
included  in  that  class.  Iowa  has  an  exceptional  number  of 
banks  called  '* savings  banks",  but  these  are  in  reality 
chiefly  commercial  banks. 

The  reader  who  is  interested  only  in  special  phases  of 
the  subject  will  find  it  possible  to  cover  these  topics  without 
reading  the  entire  volume.  The  years  prior  to  the  Civil 
War  may  be  considered  a  distinct  epoch  in  Iowa  banking. 
Existing  State  laws  were  rendered  obsolete  by  the  passage 
of  the  national  banking  act.  The  establishment  of  the  pres- 
ent commercial  and  savings  bank  system  and  its  develop- 
ment to  date  are  sketched  in  Chapters  VII-X.  The  remain- 
ing five  chapters  deal  with  special  topics  and  each  is  prac- 
tically a  unit  in  itself,  so  that  the  reader  may  omit  any  por- 
tion without  serious  loss  of  continuity. 

For  assistance  in  the  preparation  of  this  volume  the 
author  wishes  to  acknowledge  his  indebtedness  first  of  all 
to  the  late  Professor  Isaac  A.  Loos  for  his  inspiration  as  a 
teacher  and  for  suggesting  this  topic  of  investigation.  The 
main  portion  of  the  study  was  prepared  under  the  direction 
of  Professor  N.  R.  Whitney,  now  of  the  University  of  Cin- 
cinnati, and  from  him  the  writer  received  many  valuable 
suggestions.  Professor  H.  L.  Lutz  of  Oberlin  College,  Pro- 
fessor E.  T.  Miller  of  the  University  of  Texas,  and  Pro- 
fessor George  W.  Dowrie  of  the  University  of  Minnesota 
read  portions  of  the  manuscript  and  made  helpful  sugges- 
tions. 

For  assistance  in  securing  material  and  also  for  reading 
those  portions  af  the  manuscript  which  pertain  to  their 


CONTENTS 

I.     Economic  and  Political  Background  ...  1 

II.     The  Miners'  Bank  of  Dubuque     ....  10 

III.  Prohibition  of  Banking 35 

IV.  Frontier  Banking  in  Iowa 45 

V.     Constitutional   Authorization   of   Banking 

Corporations 70 

VI.     The  State  Bank  of  Iowa         83 

VII.     Establishment    of    the    Present    Banking 

System          126 

VIII.     Development  of  Banking,  1875-1921    .      .      .  143 

IX.     Supervision  of  Banking 183 

X.     The  Federal  Reserve  System  in  Iowa  .      .       .  204 

XL    Building  and  Loan  Associations    ....  229 

XII.    Farm  Mortgage  Banking 267 

XIII.  Special  Types  of  Banking 306 

XIV.  Banks  and  the  Community 333 

XV.     The  Iowa  Bankers  Association    ....  362 

Notes  and  References 385 

Index 433 


ECONOMIC  AND  POLITICAL  BACKGROUND 

For  more  than  a  century  and  a  half  after  its  first  explora- 
tion by  Marquette  and  Joliet  in  1673,  the  Iowa  country  re- 
mained the  hunting  ground  of  Indian  tribes :  indeed,  it  was 
not  until  the  early  thirties  that  white  settlers  crossed  the 
Mississippi  in  any  considerable  number,  and  even  then  the 
land  had  not  been  surveyed  and  offered  for  sale.  The  best 
evidence  shows  that  these  hardy  pioneers  who  ** squatted'* 
on  the  public  domain  were  not  lawless  intruders,  but  an 
industrious  people  coming  from  all  parts  of  the  Union. 
Later  when  the  country  was  surveyed  and  the  territory 
officially  opened  for  settlement  the  rich  prairie  land  of  Iowa 
was  sold  at  $1.25  per  acre.  In  1835  there  were  over  ten 
thousand  inhabitants  in  the  Iowa  country,  and  when  the 
Territory  of  Iowa  was  established  in  1838  it  had  a  popula- 
tion of  22,859.  The  great  highway  of  commerce  was  the 
Mississippi  River  and  along  its  banks  the  early  towns  ap- 
peared. St.  Louis,  which  was  then  the  most  important 
trading  point  of  the  region,  was  the  market  for  Iowa 
products.^ 

At  this  time,  when  Iowa  was  being  first  settled  and  when 
its  first  economic  institutions  were  being  established,  Ameri- 
can banking  was  in  a  very  chaotic  condition.  In  1832  the 
question  of  the  recharter  of  the  Second  Bank  of  the  United 
States  was  the  leading  issue  in  the  presidential  campaign. 
The  Whigs  under  the  leadership  of  Henry  Clay  espoused  the 
cause  of  the  Bank,  while  the  Democrats  opposed  it  under 
the  leadership  of  President  Jackson.  The  decisive  victory 
of  the  anti-bank  party  resulted  in  making  the  bank  question 
the  leading  political  issue  of  the  thirties  and  early  forties. 


2  HISTORY    OF    BANKING    IN    IOWA 

Moreover,  the  salutary  influence  of  the  Bank  of  the  United 
States  being  removed,  all  banking  regulation  was  left  to  the 
discretion  of  the  several  State  governments.  An  era  of 
State  bank  inflation  resulted. 

The  number  of  State  banks  increased  from  330  in  1830  to 
788  at  the  close  of  the  year  1836 ;  and  their  note  issue  more 
than  trebled  in  the  same  period.  With  the  lax  regulation 
imposed  by  many  of  the  States,  particularly  in  the  West  and 
South,  the  quality  of  this  circulation  greatly  deteriorated. 
A  wave  of  speculation  in  public  lands  swept  over  the  coun- 
try. In  1837  there  came  a  violent  financial  collapse,  fol- 
lowed by  the  suspension  of  specie  payments  and  heavy 
liquidation.  The  latter  continued  until  about  1843,  with 
some  periods  of  improvement.  Meantime,  the  volume  of 
bank  notes  in  circulation  dropped  from  the  high  level  of 
1836-1837  to  about  the  point  where  it  had  been  in  1830. 
Some  gain  had  been  made  in  the  quantity  of  specie  in  cir- 
culation ;  but  in  the  six  years  of  contraction  the  per  capita 
money  in  circulation  in  the  United  States  fell  from  $13.87 
to  $7.87.2 

It  is  not  surprising  that  early  banking  in  Iowa  was 
strongly  colored  by  the  economic  and  political  background 
against  which  it  was  projected.  From  the  meager  data 
available  it  seems  that  the  general  economic  disorders  pre- 
valent in  the  country  were  even  more  severe  in  the  pioneer 
communities  of  Iowa.  Money  was  scarce  and  its  quality 
was  very  poor.  The  Iowa  pioneer  brought  little  money 
with  him  to  the  new  home.  His  former  property  had  fre- 
quently been  converted  into  cash  to  pay  for  land.  Often, 
therefore,  he  was  '  *  land  poor ' '.  Heavily  in  debt  as  he  fre- 
quently was,  he  found  the  period  of  falling  prices  which 
resulted  from  the  heavy  liquidation  after  the  panic  of  1837 
very  detrimental  to  his  interest. 

The  effect  of  this  scarcity  of  a  satisfactory  currency  was 
shown  in  the  economic  conditions  of  the  early  forties.     A 


ECONOMIC    AND    POLITICAL    BACKGROUND  3 

Muscatine  County  correspondent  of  The  Iowa  Standard — 
then  published  simultaneously  at  Bloomington  (now  Musca- 
tine) and  Iowa  City — describes  agricultural  conditions  in 
Iowa  in  the  fall  of  1840  in  a  very  interesting  way.  Doubt- 
less the  condition  he  pictures  was  characteristic  of  all  other 
Iowa  communities  at  that  time.  The  communication,  signed 
"Poor  Richard  and  his  Brother",  reads  in  part  as  follows: 

We  are,  many  of  us  in  debt.  We  came  here,  some  two,  some 
six  years  ago,  and  settled  upon  land  that  was  not  in  market,  and 
was  not  expected  to  be  for  some  time  after  we  settled.  Some  of  us 
then  had  a  Uttle  money  and  some  of  our  neighbors  had  none.  We 
loaned  to  each  other  to  buy  the  necessaries  of  our  families,  which 
then  cost  us  '*a  right  good  chance  of  money."  We  also  sold  our 
little  effects  in  our  old  settlement  partly  on  credit,  expecting  the 
money  when  our  land  came  into  market.  But  the  day  of  sale  came 
when  many  of  us  were  not  ready.  We  were  obliged  to  borrow 
money,  at  from  25  to  75  per  cent,  and  pledge  our  homes  for  its 
payment.  We  were  also  in  debt  to  our  neighbors  and  our  mer- 
chants.   How  are  we  to  pay  all  these  debts  ? 

We  must  sell  part  of  our  land.  We  know  that  Iowa  has  a  rich 
and  productive  soil,  and  that  with  little  labor,  compared  with  other 
wild  countries,  it  is  brought  into  a  cultivated  field — that  our  great 
navigable  river  will  always  enable  us  to  carry  off  our  produce  with 
little  expense ;  and  therefore  our  lands  will  some  day  become  valu- 
able. If  we  wish  to  retain  a  footing  here,  we  must  sell  a  part  and 
redeem  our  pledges,  satisfy  our  creditors  and  keep  off  the  Sheriff. 
We  had  better  have  but  80  acres  and  have  it  secure  and  safe,  than 
have  twice  or  four  times  the  quantity  and  make  slaves  of  ourselves 
to  keep  peace  with  our  creditors.  .  .  . 

We  may  calculate  that  next  spring  there  will  be  a  good  chance 
of  farm  hunters,  and  we  who  are  in  debt,  had  better  embrace  the 
opportunity  and  sell  a  part  and  save  a  part,  than  to  do  worse.  We 
have  had  the  pleasures  and  hardships  of  settling  this  new  country, 
and  don't  want  to  try  it  over  again.  We  want  to  stay  here  near 
the  river  and  near  the  market.  We  want  to  fix  stables  and  shelters 
for  our  stock ;  to  fix  our  gardens  and  set  out  orchards ;  to  make  our 
houses  neat,  durable,  and  comfortable;  and  to  live  in  peace,  com- 
fort and  happiness  the  remainder  of  our  days.^ 


4  HISTORY    OF    BANKING    IN   IOWA 

In  the  years  immediately  following,  the  situation  de- 
scribed by  ''Poor  Richard"  in  1840  seems  to  have  become 
worse  rather  than  better.  An  extract  from  the  Iowa  Sun 
of  Davenport  shows  how  serious  the  condition  had  become 
by  April,  1841: 

The  times  are  hard,  and  business  of  all  kinds  dull.  Money,  even 
counterfeit  paper,  and  bogus,  have  almost  totally  disappeared  (no 
other  money  having  been  current  here  since  the  last  land  sales.) 
Emigrants  continue  to  pour  into  the  Promised  Land  by  tens,  hun- 
dreds, and  thousands — filling  up  the  back  country  with  an  indus- 
trious and  enterprising  population.^ 

The  hard  times  evidently  reached  their  most  acute  stage 
in  the  winter  of  1842-1843.  In  the  spring  of  that  year  the 
economic  conditions  are  reflected  in  the  difficulties  confront- 
ing the  newspapers.  Notice  is  given  that  The  Burlington 
Haivkeye  had  been  forced  to  suspend  because  it  was  unable 
to  collect  the  money  due  on  subscriptions.  The  editor  of 
The  Iowa  Standard  was  very  sympathetic,  being  in  danger 
of  much  the  same  fate  himself.  Money  being  scarce,  he 
asked  for  payment  in  produce ;  and  this  notice  appeared  in 
the  comment  on  the  fate  of  his  colleague : 

We  are  at  this  time  in  pressing  need  of  many  articles  which  our 
country  friends  could  supply  us  with,  would  they  but  wake  up  and 
make  an  effort  to  pay  their  dues.  Almost  every  description  of 
produce,  in  reasonable  quantities,  can  be  turned  to  account ;  and  if 
those  who  are  in  arrearage  would  either  come  and  see  us,  or  com- 
municate upon  the  subject  by  letter  or  messenger — (not  subjecting 
us  to  postage  however) — doubtless  arrangements  mutually  advan- 
tageous could  be  made  in  almost  every  instance.^ 

Prices  quoted  on  the  St.  Louis  market  at  about  this  time 
show  that  it  would  take  a  considerable  quantity  of  bacon 
and  beans  to  pay  a  year's  subscription  to  a  weekly  news- 
paper. Representative  of  the  value  of  products  of  the  Iowa 
farmer  are  quotations  of  bacon  and  ham  at  three  cents  per 
pound;  beans  at  fifty  cents  per  bushel;  butter  in  kegs  at  ten 


ECONOMIC    AND    POLITICAL    BACKGROUND  5 

cents  per  pound,  in  barrels  at  six  cents ;  wheat  at  forty-eight 
to  fifty  cents  per  bushel;  and  shelled  corn  at  twenty  cents 
per  bushel.  Since  these  quotations  were  for  St.  Louis  in 
May  and  were  spoken  of  as  representing  a  return  of  pros- 
perity, we  may  safely  assume  that,  at  the  worst  of  the  hard 
times,  prices  in  Iowa  were  much  lower.® 

Under  the  caption  ''Hard  Money  Times",  The  Iowa 
Standard  gives  some  earlier  prices  at  a  constable's  sale  of 
the  property  of  a  poor  widow  in  Pike  County,  Missouri — a 
county  on  the  Mississippi  River  in  the  northern  part  of  the 
State.  The  following  named  articles  were  sold  at  the  prices 
annexed : 

3  good  horses,  each $1.50 

1  large  ox 12i/^ 

5  cows,  2  steers,  1  calf,  the  lot 3.25 

20  sheep  each 12i^ 

24  hogs,  lot   75 

1  dining  table   50 

1  eight  day  clock 2.50 

1  lot  of  tobacco,  7  or  8  cwt.,  lot 5.00 

3  stacks  of  hay  each 25 

1  stack  fodder 25 

The  Hannibal  Journal,  from  which  these  figures  were 
taken,  was  led  to  comment  as  follows: 

Truly  we  are  beginning  to  feel  the  benefits  which  flowed  from  the 
destruction  of  the  old  United  States  Bank — the  consequent  influx 
of  shinplasters — and  the  ultimate  return  to  a  purely  specie  cur- 
rency. The  rich  may  well  rejoice  at  a  policy  that  more  than 
trebles  their  wealth — but  as  for  the  poor — God  help  them.^ 

Scarcity  of  money  is  evidenced  by  one  more  instance  which 
came  a  few  months  later.  The  Iowa  Standard  states  that 
the  workmen  who  built  the  dam  and  mill  at  Iowa  City  took 
their  pay  in  stock  of  the  corporation.  Only  $12  in  cash  was 
spent  in  erecting  a  dam  which  cost  $5000.®  It  must  be  re- 
membered, too,  that  banks  of  deposit  were  not  available,  so 
that  no  bank  check  was  used  by  the  builders. 


6  HISTORY   OF    BANKING    IN    IOWA 

The  quality  of  the  circulation  appears  to  have  been  as 
poor  as  its  quantity  was  limited.  There  was  little  specie 
in  circulation  in  Iowa,  and  such  as  was  used  contained  few 
coins  from  the  United  States  mint.  By  some  writers  this 
lack  of  specie  was  ascribed  to  the  policy  of  the  treasury  de- 
partment as  laid  down  in  the  specie  circular — an  order 
issued  on  July  11, 1836,  which  required  land  payments  to  be 
made  in  coin.®  By  others  the  blame  was  laid  to  the  illegal 
circulation  of  small  bank  notes  which  drove  the  better  money 
from  use.  A  pioneer  who  came  to  Iowa  in  1844,  and  is  still 
a  resident  of  Iowa  City,  told  the  writer  that  in  those  days 
most  of  the  silver  coins  were  of  foreign  mintage.  Spanish 
silver  quarters  were  used  until  worn  smooth.  They  were 
then  crossed  with  a  knife  and  reduced  to  twenty  cents.  In 
like  manner  the  twelve  and  one-half  and  six  and  one-fourth 
cent  pieces  were  reduced  to  ten  and  five  cents  respectively.^^ 
The  California  gold  discoveries  increased  the  quantity  of 
American  gold  coins  in  circulation  during  the  fifties.  After 
the  change  of  the  coinage  ratio  in  1834,  silver  was  under- 
valued to  such  a  degree  that  a  serious  dearth  of  minor  coins 
was  felt  throughout  the  whole  country.  The  situation  be- 
came so  serious  that  in  1853  an  act  was  passed  providing 
for  the  coinage  of  subsidiary  silver  coins  of  reduced  weight 
and  limited  legal  tender  quality.  Four  years  later  Con- 
gress passed  an  act  repealing  all  statutes  giving  legal  tender 
power  to  foreign  coins.  This  legislation  did  much  to  estab- 
lish a  currency  made  up  of  domestic  coins.^^ 

Paper  currency  included  the  poorest  bank  notes  in  cir- 
culation. Michigan  bank  notes  were  a  large  item  among 
the  assets  of  the  Miners'  Bank  of  Dubuque  at  the  time  of 
its  first  published  statements  in  1837.  These  were  the  worst 
of  a  very  doubtful  lot  of  currency.  ' '  Michigan  money  was 
reported  in  June,  1838,  to  consist  of  three  kinds,  red  dog, 
wild  cat,  and  catamount.  '  Of  the  best  quality  it  is  said  that 
it  takes  five  pecks  to  make  a  bushel.'  "^^    It  appears  that 


ECONOMIC    AND    POLITICAL   BACKGROUND  7 

rather  more  than  five  pecks  of  the  notes  in  circulation  in 
Iowa  were  required  for  a  bushel. 

In  view  of  the  severe  financial  conditions  against  which 
they  were  struggling,  it  is  not  surprising  to  find  the  Iowa 
pioneers  absorbingly  interested  in  the  questions  of  banking 
and  currency.  Around  these  issues  the  political  battles  of 
the  thirties  and  early  forties  were  waged.  Andrew  Jackson 
had  led  the  Democratic  party  into  the  fight  against  the  Sec- 
ond Bank  of  the  United  States.  The  substitute  which  was 
provided  was  a  heterogeneous  system  of  State  regulated — 
or  unregulated — ^banks.  The  Whigs  had  undertaken  the  es- 
tablishment of  a  third  Bank  of  the  United  States  and  gen- 
erally supported  the  regulation  rather  than  the  prohibition 
of  banking  within  the  States. 

The  loiva  Standard,  a  supporter  of  the  Whig  doctrines, 
in  addition  to  upholding  the  Whig  positions  in  national 
and  State  affairs,  printed  the  more  extreme  statements  of 
the  opposition.  A  considerable  amount  of  the  space  de- 
voted to  the  Whig  position  was  given  over  to  long  articles 
defending  the  party  doctrines.  In  one  issue  the  front  page 
was  almost  entirely  devoted  to  the  **  Report  of  the  Select 
Committee  of  the  States  on  the  Currency".  This  was 
Henry  Clay's  plan  for  the  proposed  Bank  of  the  United 
States  in  1841.  The  Iowa  Standard  also  carried  articles 
supporting  the  measure.  A  speech  by  State  Senator  Nash, 
in  the  Ohio  Senate,  concerning  banks  and  the  currency  was 
given  the  entire  front  page  and  half  of  the  second  in  two 
issues.  The  Whig  doctrine  from  the  editor's  own  view 
point  was  set  forth  in  a  series  of  long  editorials  which  were 
concluded  on  November  23,  1843.  He  pointed  out  that  the 
abolition  of  bank  paper  was  working  a  hardship  to  the  land- 
owners of  Iowa,  who  were  largely  in  the  debtor  class.^^ 

Editors  seemed  to  express  themselves  most  feelingly  when 
describing  conditions  in  neighboring  Commonwealths  or 
attacking  opposition  papers.    To  show  the  extreme  doctrine 


8  HISTORY    OF    BANKING   IN   IOWA 

of  some  opponents  of  banking  The  Iowa  Standard  quotes 
the  following  from  the  Kalida  Venture  (Ohio),  which  it 
calls  a  Loco-foco  ^^  paper  of  the  first  water: 

There  is  not  a  single  hank  in  the  United  States  that  is  much  bet- 
ter than  a  den  of  thieves,  seeking  an  opportunity  to  "fail"  to  ad- 
vantage and  rob  the  people!  How  disgusting,  then,  is  the  hypo- 
critical jargon  of  the  bank  lackeys  and  slaves,  about  the  recharter 
of  the  '  *  good  banks, "  "  sound  banks ! ' '  Pish ! — humbug ! — how  can 
Goodness  come  out  of  Hell  ?^^ 

The  Iowa  Capital  Reporter,  the  organ  of  Democracy  at 
the  capital,  was  untiring  in  its  opposition  to  banks  of  any 
kind.  Antagonism  to  banking  institutions  even  transcended 
civic  pride.  When  it  was  proposed  to  establish  a  bank  at 
Iowa  City  the  brief  notice  in  the  paper  fairly  bristled  with 
invectives.  The  institution  was  called  an  ''incipient  little 
monster",  a  "vampire  upon  the  body  politic",  and  a  ma- 
chine for  "swindling  honest  industry".  The  writer  charged 
that  it  was  being  promoted  for  the  advantage  of  "a  pam- 
pered bank  aristocracy  in  Iowa."  But  his  firm  faith  in 
the  attitude  of  the  Democratic  majority  in  the  legislature 
led  him  to  "bespeak:  for  this  hybrid  little  monster,  a  warm 
reception,  a  summary  disposal,  and  a  speedy  quietus."^® 

With  statesmanship  that  would  do  credit  to  twentieth 
century  politicians  each  party  sought  to  lay  all  the  eco- 
nomic ills  of  the  day  at  the  door  of  the  party  in  power.  As 
is  usual  in  such  cases,  strange  inconsistencies  may  be  found 
in  their  reasoning.  A  writer  in  the  Bloomington  Herald 
charged  the  unfortunate  pecuniary  condition  of  Indiana  to 
the  Whigs.  The  Iowa  Standard  called  attention  to  Illi- 
nois, "where  loco-focism  rides  triumphant,  and  the  gov- 
ernor was  obliged  to  inform  the  legislature  that  the  treasury 
was  not  able  even  to  pay  the  postage  on  his  official  corre- 
spondence. "^'^ 

A  review  of  the  existing  economic  and  political  conditions 
shows  clearly  that  banking  in  Iowa  began  under  anything 


ECONOMIC    AND    POLITICAL    BACKGROUND  9 

but  favorable  circumstances.  The  Territory  was  rich  in 
natural  wealth,  but  sorely  in  need  of  working  capital.  Its 
circulating  medium  was  insufficient  in  quantity  and  poor  in 
quality.  The  entire  country  was  suffering  from  a  chaotic 
banking  situation  and  passing  through  a  severe  financial 
depression.  Bitter  partisanship  colored  all  consideration 
of  the  banking  question. 


II 

THE  MINERS'  BANK  OF  DUBUQUE 

During  the  Territorial  period  the  only  chartered  bank 
established  in  what  is  now  Iowa  was  the  Miners'  Bank  of 
Dubuque.  The  lead  mines  near  Dubuque  were  responsible 
for  the  early  settlement  and  commercial  importance  of  the 
city.  Lead  had  been  discovered  in  this  region  by  the 
Indians,  and  the  mines  were  later  developed  by  Julien  Du- 
buque during  the  period  of  the  Spanish  possession  of  the 
trans-Mississippi  country.  Prior  to  1833  the  lead  district 
was  not  legally  open  for  settlement,  and  settlers  were  sev- 
eral times  ejected  by  the  military  forces  of  the  United 
States.  In  June  of  that  year  the  government  began  leasing 
the  mines  to  its  citizens,  and  by  1840  Dubuque  had  come  to 
be  known  as  one  of  the  chief  lead  producing  sections  in 
America.^^ 

ESTABLISHMENT  OF  THE  BANK 

Late  in  the  year  1835  a  branch  of  the  Bank  of  Illinois  was 
established  at  Galena,  Illinois.^^  Stimulated  doubtless  by 
this  action  and  feeling  a  real  need  for  banking  facilities,  the 
citizens  of  Dubuque  made  application  to  the  legislature  of 
the  Territory  of  Wisconsin  (of  which  the  Iowa  country  was 
then  a  part)  for  a  bank  charter.  On  November  30,  1836,  an 
act  to  incorporate  the  stockholders  of  the  Miners '  Bank  of 
Dubuque  was  approved  by  the  Territorial  legislature.^®  The 
approval  of  Congress  was  given,  with  certain  limitations, 
on  March  3,  1837.^1 

The  terms  of  incorporation,  as  amended  by  Congress, 
fixed  the  capital  at  $200,000 — divided  into  two  thousand 
shares  of  $100  each.     Nine  commissioners  were  appointed 

10 


THE    MINERS'  BANK    OF    DUBUQUE  11 

to  receive  subscriptions;  and  these  same  men  were  to  be- 
come the  first  directors.  Subscriptions  were  to  be  opened 
in  Dubuque  County,  and  in  such  other  places  as  the  com- 
missioners might  think  proper,  as  soon  as  convenient  after 
the  act  received  the  approval  of  Congress.  One-tenth  of 
the  amount  of  each  share  was  to  be  paid  at  the  time  of  sub- 
scribing and  the  balance  in  installments  at  the  discretion 
of  the  directors  who  were  to  give  ninety  days  notice  in  a 
local  newspaper.  The  directors  were  authorized  to  call 
for  not  exceeding  forty  per  cent  of  the  subscriptions  of  each 
stockholder  at  one  installment;  and  the  stockholders  were 
not  permitted  to  increase  the  capital  without  the  consent  of 
Congress  previously  obtained.^^ 

The  management  of  the  affairs  of  the  bank  was  vested  in 
a  board  of  seven  directors.  These  directors  were  required 
to  be  residents,  citizens  of  the  Territory,  and  stockholders 
of  the  bank.  Their  term  of  office  was  for  one  year,  and 
election  was  to  take  place  at  a  general  meeting  of  the  stock- 
holders to  be  held  on  the  first  Monday  in  October.  At  these 
elections  the  shares  were  not  given  equal  representation, 
but  each  stockholder  was  allowed  one  vote  each  for  his  first 
ten  shares  and  above  that  amount  only  one  vote  for  every 
ten  shares.  Stockholders  not  resident  within  the  United 
States  were  denied  the  privilege  of  voting  by  proxy.  Other 
stockholders  were  given  the  right  to  be  represented  by 
proxies  to  other  stockholders  or  to  the  cashier  of  the  bank.^* 

The  powers  and  duties  of  the  directors  were  such  as  are 
commonly  vested  in  such  a  body.  They  could  elect  one  of 
their  own  number  president,  prescribe  by-laws,  and  make 
rules  and  regulations  concerning  the  conduct  of  business 
and  duties  of  officers  and  employees.  A  majority  of  the 
board  of  directors  was  authorized  to  declare  the  half-yearly 
dividends. 

Directors  were  individually  liable  for  all  obligations  of 
the  corporation  in  excess  of  twice  the  sum  of  the  capital 


12  HISTORY    OF   BANKING    IN   IOWA 

stock  subscribed  and  actually  paid  into  the  bank.  However, 
a  director  was  relieved  of  this  personal  liability  if  absent 
when  the  excess  was  contracted  or  if  he  dissented  from  the 
resolution  or  act  whereby  the  same  was  contracted.  It  was 
further  provided  that,  **No  one  director  shall  be  permitted 
at  any  one  time  to  become  indebted  to  the  bank  by  loans, 
endorsement  or  otherwise,  to  an  amount  exceeding  five  thou- 
sand dollars.  "2^ 

The  bank  was  prohibited  from  owning  any  real  estate 
except  the  necessary  banking  house  and  lot  or  such  other 
realty  as  it  might  acquire  in  satisfaction  of  debts  pre- 
viously contracted  or  purchased  at  sales  upon  judgments. 
In  like  manner  it  was  prohibited  from  purchasing  or  selling 
goods,  wares,  or  merchandise,  directly  or  indirectly,  except 
when  these  had  been  pledged  as  security  or  bought  at  judg- 
ment sale  for  subsequent  resale. 

The  interest  rate  of  the  bank  on  its  loans  and  discounts 
was  limited  to  seven  per  cent  payable  in  advance.  State- 
ments of  the  condition  of  the  bank  were  required  to  be  made 
by  the  president  and  cashier  whenever  desired  by  the  Legis- 
lative Assembly  of  the  Territory.  The  bank  was  not  to  be 
permitted  to  owe  ''either  by  bond,  bill,  note,  or  other  con- 
tract, over  and  above  its  actual  deposits,  an  amount  to  ex- 
ceed twice  the  amount  of  its  capital  stock  actually  paid  in". 
It  was  required  to  commence  business  by  January  1,  1838, 
or  forfeit  its  charter,  and  its  corporate  life  was  to  continue 
until  May  1,  1857. 

The  most  important  function  of  a  bank  of  that  period  was 
the  issue  of  notes  for  circulation.  Indeed,  a  bank  without 
the  right  of  issue  was  scarcely  considered  feasible.  Bank- 
ing laws  aiid  special  charters  were  framed,  therefore,  pri- 
marily to  provide  safety  for  the  community  against  un- 
sound note  issues.  The  Miners'  Bank  was  not  allowed  to 
issue  notes  for  circulation  until  one-half  of  the  capital  had 
been  actually  paid  in.     Of  this  amount  of  capital,  $40,000 


THE    MINERS'  BANK    OF    DUBUQUE  13 

was  required  to  be  paid  by  the  stockholders  in  legal  coin  of 
the  United  States.  The  limitation  of  the  bank's  indebted- 
ness, other  than  for  its  actual  deposits,  to  twice  the  amount 
of  its  capital  stock  actually  paid  in,  fixed  a  maximum  limit 
to  its  note  issue.  No  note  or  bill  could  be  issued  of  less 
denomination  than  $5  and  the  legislature  reserved  the 
power  to  raise  the  minimum  denomination  of  notes  to  $10 
after  four  years,  and  to  $20  after  ten  years.^'^ 

We  find  in  these  limitations  no  special  security  against 
notes,  such  as  the  familiar  bond  deposit  of  the  national 
banks.  There  were  no  special  provisions  for  redemption 
of  notes  in  specie  or  penalty  for  non-redemption.  No  pref- 
erence was  given  to  note  holders  over  other  creditors.  The 
limitation  on  the  volume  of  notes  was  very  lax.  The  bank 
was  not  required  to  retain  permanently  the  specie  paid  in 
at  the  outset.  Objections  to  small  notes  were  the  ease  of 
counterfeiting  and  the  tendency  for  small  notes  to  remain 
longer  in  circulation  and  hence  the  greater  possibility  of 
inflation. 

In  this  one  respect  the  charter  of  the  Miners '  Bank  went 
as  far  as  could  be  desired.^^  But  on  the  whole  its  note 
issue  restrictions  were  not  strict  enough  to  avoid  the  pitfalls 
of  the  banking  practices  of  that  day. 

OPENING  OF  THE  BANK 

Subscriptions  for  the  capital  stock  were  received  on  May 
22nd,  23rd,  24th,  and  30th,  and  all  of  the  stock  was  sub- 
scribed for  on  those  days.  The  directors  issued  a  call  for 
the  payment  of  forty  per  cent  on  the  capital  stock  to  be 
made  on  the  second  Monday  of  October — one-half  of  this 
installment  to  be  in  specie.  An  election  of  directors  was 
held  on  October  14th  at  the  counting  room  of  E.  Lockwood. 
On  October  31, 1837,  the  bank  opened  its  doors  for  the  trans- 
action of  business. 

The  opening  of  the  bank  was  not  accomplished  without 


14  HISTORY    OF   BANKING    IN    IOWA 

considerable  friction;  the  selection  of  officers  occasioned 
some  ill-feeling;  and  almost  as  soon  as  the  bank  began 
operations  charges  of  various  kinds  of  corruption  were 
made.  It  was  said  that  the  full  amount  of  capital  had  not 
been  paid  before  issuing  notes.  Large  stockholders  were 
charged  with  attempting  to  secure  control  of  the  stock  of 
small  holders.  The  panic  of  that  year  and  the  general  sus- 
picion of  banks  made  it  easy  for  these  rumors  to  gain  cre- 
dence among  the  people.^^ 

FIEST  LEGISLATIVE  INVESTIGATION 

The  rumors  concerning  the  bank  soon  reached  the  Legis- 
lative Assembly  of  the  Territory  of  Wisconsin  which  was  in 
session  at  the  time  in  Burlington ;  and  on  November  16, 1837, 
just  a  little  over  two  weeks  after  the  opening  of  the  bank,  a 
committee  of  three  from  the  House  of  Representatives  was 
appointed  to  make  an  examination  of  the  affairs  of  the 
banks  incorporated  in  the  Territory.^^ 

This  committee  made  a  personal  visit  to  the  Miners '  Bank 
of  Dubuque  to  get  accurate  first-hand  information  and  to 
give  the  citizens  of  Dubuque  a  chance  to  present  any  facts 
they  might  have  as  to  the  condition  or  management  of  the 
bank.  The  investigation  by  the  committee  consisted  of  sub- 
mitting to  the  officers  of  the  bank  a  list  of  written  questions 
which  were  answered  by  the  cashier.  The  committee  re- 
mained in  Dubuque  twenty-eight  hours,  but  according  to 
their  own  statement  they  did  not  deem  it ' '  within  the  scope 
of  their  authority  to  inspect  the  books  of  the  bank,  or  to 
count  the  money,  although  every  facility  for  that  purpose 
was  offered  to  them  by  the  Cashier. "  No  persons  appeared 
to  report  to  the  committee,  either  favorably  or  unfavorably. 
A  more  lax  and  inadequate  investigation  could  scarcely  have 
been  made,  but  it  seemed  to  satisfy  the  entire  committee  that 
the  bank  was  in  a  sound  condition.  The  report  also  stated 
that  the  bank  had  complied  with  all  the  regulations  of  the 


THE    MINERS'  BANK    OF    DUBUQUE  15 

charter,  but  on  this  point  there  was  a  difference  of  opinion. 
One  member  of  the  committee  claimed  that  the  issuing  of 
post  notes  was  a  violation  of  the  charter ;  but  the  other  two, 
while  questioning  the  wisdom  of  issuing  this  type  of  notes, 
did  not  regard  it  as  illegal.  The  report  of  the  committee 
was  adopted  and  the  bank  was  pronounced  in  a  ' '  sound  and 
solvent  condition".  The  resolutions  adopted  by  the  House 
stated,  however,  that  that  body  did  not  consider  it  within 
the  scope  of  the  bank's  authority  to  issue  post  notes  for  the 
purpose  of  making  ordinary  discounts.^^ 

Although  the  result  of  this  first  investigation  was  highly 
satisfactory  to  friends  of  the  bank,  it  did  not  stop  criticism 
of  the  institution.  The  Iowa  News,  a  Dubuque  newspaper, 
was  a  strong  supporter  of  the  bank  and  used  its  editorial 
columns  to  uphold  it.^^  Its  efforts,  however,  were  not  suc- 
cessful in  quieting  the  opposition.  Opponents  of  the  bank 
continued  their  fight  on  the  institution  through  such  news- 
papers as  would  print  their  articles  and  also  sent  statements 
concerning  it  to  the  legislature.^^  These  attacks  soon  called 
forth  a  second  investigation. 

SECOND  LEGISLATIVE  INVESTIGATION 

The  first  investigation  had  been  conducted  by  a  coromittee 
of  three  appointed  by  the  House  of  Eepresentatives.  On 
January  19, 1838,  a  joint  resolution  was  approved  providing 
for  the  appointment  of  a  committee  of  two  from  each  house 
to  investigate  the  affairs  and  condition  of  the  Miners '  Bank 
and  to  report  at  the  extra  session  of  the  Legislative  As- 
sembly in  June  of  that  year.  This  committee  was  directed 
to  "visit  the  bank  in  person,  to  examine  its  books  and  pa- 
pers, count  the  money  in  its  vaults  and  to  examine  whether 
the  said  bank  has  complied  with  the  provisions  of  its  charter 
or  not".^^ 

On  February  3,  1838,  the  committee  of  investigation  met 
in  Dubuque  and  proceeded  to  make  the  examination  as  di- 


16  HISTORY    OF    BANKING    IN   IOWA 

rected.  Their  first  action  was  to  address  to  the  officers  of 
the  bank  nineteen  questions  on  which  they  asked  written 
answers  under  oath  or  affirmation.  It  was  the  object  of 
these  questions  to  find  out  how  well  the  provisions  of  the 
charter  had  been  carried  out  in  the  organization  of  the  bank 
and  what  its  condition  was  at  the  time  of  the  investigation. 

The  answers  showed  that  the  required  $100,000  of  capital 
had  been  paid  in,  but  gave  the  payments  as  having  been 
made  in  the  following  manner:  $40,000  in  certificates  for 
specie  deposited  in  Detroit;  $50,000  in  notes  of  the  Jackson 
County  Bank  and  the  Bank  of  Manchester  in  the  State  of 
Michigan;  and  $10,000  in  specie  and  various  other  bank 
notes.^^  The  value  of  the  notes  of  the  two  Michigan  banks, 
however,  is  suggested  by  the  fact  that,  in  April,  1838,  among 
a  long  list  of  banks  whose  notes  had  no  claim  to  public  con- 
fidence, the  bank  commissioners  of  Michigan  reported  the 
Bank  of  Manchester  and  the  Jackson  County  Bank.^* 

As  to  the  Jackson  County  Bank  the  following  facts  had 
been  revealed  by  examination: 

Gold  coin  was  exhibited  loose  in  a  drawer,  which,  being  counted, 
amounted  to  the  sum  of  $1037.78;  about  $150  in  loose  silver  was 
also  counted.  Beneath  the  counter  of  the  bank,  nine  boxes  were 
pointed  out  by  the  teller  as  containing  $1000  each.  The  teller  se- 
lected one  of  these  boxes  and  opened  it;  this  was  examined,  and 
appeared  to  be  a  full  box  of  American  half  dollars.  One  of  the 
Commissioners  then  selected  a  box,  which  he  opened,  and  found  the 
same  to  contain  a  superficies  only  of  silver,  while  the  remaining 
portion  consisted  of  lead  and  ten-penny  nails.  The  Commissioner 
then  proceeded  to  open  the  remaining  seven  boxes ;  they  presented 
the  same  contents  precisely,  with  a  single  exception,  in  which  the 
substratum  was  window-glass  broken  into  small  pieces.^^ 

This  report  from  a  neighboring  State  illustrates  the  evils 
in  contemporary  banking  practice.  Moreover,  it  shows  that 
in  accepting  notes  issued  by  this  institution  in  payment  of 
stock  subscriptions,  the  directors  of  the  Miners'  Bank  were 
launching  it  upon  a  very  unstable  basis. 


THE    MINERS'  BANK    OF    DUBUQUE  17 

From  testimony  of  the  cashier,  G.  D.  Dillon,  it  appears 
that  some  stockholders  of  the  Miners'  Bank  paid  forty  per 
cent  on  their  stock,  put  in  their  notes,  and  drew  out  the 
money  at  once.  Only  nominally,  therefore,  had  the  bank 
complied  with  the  charter  requirement  that  one-half  the 
capital  be  actually  paid  in  before  any  notes  were  issued  for 
circulation.  In  reply  to  a  question  concerning  the  denom- 
ination of  the  bank  notes,  the  officers  stated  that  they  had 
never  issued  notes  of  less  denomination  than  $5.^®  By  the 
terms  of  the  charter,  notes  could  not  be  issued  until  $40,000 
of  specie  had  been  paid  in  by  the  stockholders.  As  a  matter 
of  fact,  the  specie  on  hand  as  shown  by  a  statement  of  con- 
dition of  the  bank  on  February  3,  1838,  and  verified  count 
of  the  investigating  committee  was  $1318.02.  The  officers 
explained  that  arrangements  had  been  made  with  a  Detroit 
bank  to  hold  $40,000  in  specie  for  them  and  assured  the  com- 
mittee that  the  $40,000  would  be  in  the  hands  of  the  bank  at 
the  opening  of  navigation.  This  did  not  satisfy  the  require- 
ments of  the  committee  and,  although  the  officers  were  con- 
fident that  they  would  shortly  receive  the  money  from  De- 
troit, this  shortage  of  specie  was  responsible  for  a  supple- 
mentary examination  held  in  June. 

The  investigation  showed  further  that  the  majority  of 
the  circulating  notes  were  not  payable  on  demand  but  at  a 
future  date.  Thus  on  February  5, 1838,  the  amount  of  notes 
in  circulation  was  $14,030 — of  which  $1350  was  payable  on 
demand  and  $12,680  twelve  months  after  date.  The  officers 
stated  that  they  paid  out  these  post  notes  in  payment  of 
discounted  notes  or  drafts,  and  that  they  received  them  in 
payment  of  debts  due  the  bank  without  regard  to  maturity. 
To  the  question,  ''Have  you  at  any  time  refused  the  pay- 
ment of  specie  for  your  bills  when  demanded  at  your 
counter?"  the  answer  was,  "We  have  never  declined  paying 
specie  on  our  bills,  when  presented  at  our  counter."  In 
reply  to  a  further  question  regarding  redemption  of  post 


18  HISTORY    OF   BANKING   IN   IOWA 

notes  the  answer  was  given,  that  they  were  redeemed  partly 
by  notes  of  other  banks  and  partly  with  notes  of  the  Du- 
buque bank. 

Notes  of  other  banks  constituted  such  an  important  part 
of  the  assets  of  the  bank  and  were  used  to  such  an  extent 
by  them  in  discounting,  that  the  attitude  of  the  bank  toward 
receiving  them  is  of  interest.  The  question  was  asked 
whether  such  notes  when  used  in  discounting  would  be  ac- 
cepted in  payment  of  debts  due  the  bank.  To  which  the 
officials  replied  that  they  were  received  by  the  bank  to  pay 
any  debt  due  the  bank  *  *  which  may  have  been  created  by  the 
issues  of  those  notes."  The  use  of  bank  notes  of  all  shades 
of  value  was  not  uncommon  in  that  period,  and  in  thus 
promoting  the  circulation  of  such  a  large  volume  of  almost 
worthless  notes — $20,000  of  the  notes  of  the  two  Michigan 
banks  noted  above  were  still  included  among  the  bank's 
assets — the  Miners '  Bank  was  following  the  accepted  prac- 
tice of  the  time. 

The  bank  was  able  to  show  that  the  rate  of  discount  had 
not  exceeded  seven  per  cent.  No  director  had  ever  been 
indebted  to  the  bank  to  the  amount  of  $5000  which  was  the 
charter  limit.  On  these  and  certain  other  points  there  is  no 
evidence  that  the  bank  had  violated  the  provisions  of  its 
charter. 

As  noted  above,  the  committee  was  not  satisfied  with  the 
amount  of  specie  on  hand  and  postponed  its  final  report  on 
the  bank  until  after  a  supplementary  examination  was  held 
in  June.  This  examination  showed  a  considerable  increase 
in  bills  discounted  and  individual  deposits.  The  notes  of  the 
Jackson  County  Bank  and  the  Manchester  Bank  had  mostly 
been  disposed  of.  Promises  had  been  made  that  the  bank 
would  increase  its  specie  holdings  as  soon  as  the  $40,000  for 
which  they  held  certificate  of  deposit  in  a  Detroit  bank  could 
be  transported.  It  is  noted,  however,  that  on  June  4th  the 
amount  of  specie  on  hand  was  only  $457.30 — ^nearly  $1000 


THE    MINERS'  BANK    OF    DUBUQUE  19 

less  than  at  the  time  of  the  February  report.  An  item  of 
$20,000  '' Specie  intransito"  is  found  among  the  assets.. 
This  j£,ailed  to  satisfy  the  examining  committee;  and  their 
report  to  the  legislature  was  to  the  effect  that  the  bank  had 
not  met  the  charter  provisions  nor  kept  the  promises  made 
at  the  time  of  the  February  examination.  They  regarded 
the  bank  as  in  an  unsound  condition  and  found  very  little 
confidence  placed  in  it  by  the  citizens  of  the  community. 
In  view  of  these  facts  they  recommended  the  immediate 
repeal  of  the  bank's  charter.^ ^ 

Nothing  was  done,  however,  about  repealing  the  bank's 
charter,  for  on  June  12,  1838,  the  Territory  of  Iowa  was 
established  by  act  of  Congress — the  act  of  separation  taking 
effect  on  July  4, 1838.^^.  The  legislature  of  Wisconsin  Ter- 
ritory adjourned  its  meeting  at  Burlington;  and  the  first 
session  of  the  Legislative  Assembly  of  the  Territory  of  Iowa 
was  begun  at  Burlington  on  November  12,  1838.^^  This 
change  in  jurisdiction  was  doubtless  responsible  for  the 
lack  of  definite  action  on  the  committee 's  report. 

THIED  LEGISLATIVE  INVESTIGATION 

Early  in  the  session  of  the  First  Legislative  Assembly  of 
the  Territory  of  Iowa  the  third  of  the  series  of  legislative 
investigations  of  the  Miners'  Bank  was  instigated.  On 
November  29,  1838,  a  resolution  was  approved^^  providing 
for  a  committee  of  three — one  from  the  Council  and  two 
from  the  House  of  Representatives — to  proceed  at  once  to 
Dubuque  and  examine  the  bank. 

This  committee  worked  in  much  the  same  manner  as  the 
former  joint  committee.  The  questions  asked  were  almost 
all  answered  from  the  bank's  statement  for  December  7, 
1838,  submitted  by  the  cashier.  In  answer  to  the  question 
as  to  the  amount  of  capital  stock  paid  in  before  the  bank 
commenced  business,  the  cashier  replied  that  **  fifty  per 
cent  upon  the  capital  stock,  was  required  to  be  paid  in  before 


20  HISTORY    OF    BANKING    IN    IOWA 

the  bank  could  legally  commence  operations."  This  reply 
seemed  to  satisfy  the  committee,  but  adds  nothing  to  the  in- 
formation on  the  disputed  point.  The  statement  shows  a 
decrease  in  the  volume  of  post  notes  in  circulation,  an  in- 
crease in  bills  discounted,  and  a  relatively  large  decrease  in 
individual  deposits  since  June  4,  1838.  The  amount  of 
specie  on  hand  was  still  very  low — amounting  to  $3033. 
Notes  of  other  banks  were  held  to  the  amount  of  $18,874. 

In  the  report  to  the  Legislative  Assembly  the  committee 
announced  that  the  cash  on  hand  was  nearly  double  the 
amount  of  liabilities  of  the  bank,  exclusive  of  the  capital 
stock  and  undivided  profits.  There  is  no  distinction  made 
between  notes  of  other  banks  and  specie,  the  committee  ap- 
parently not  being  concerned  with  the  ability  of  the  bank  to 
meet  its  obligations  in  specie.  Circulation  amounted  to 
$16,025;  so  that  for  redemption  of  its  notes  alone,  not  in- 
cluding anything  for  deposits,  the  bank  had  a  specie  reserve 
of  only  about  one  to  five. 

The  report  of  the  committee  was  to  the  effect  that  the 
Miners'  Bank  of  Dubuque  was  in  a  safe  and  solvent  condi- 
tion. This  report  appears  to  have  been  satisfactory  to  both 
houses  of  the  Assembly.^^  From  December  19,  1838,  when 
this  report  was  concurred  in,  until  the  meeting  of  the  Fourth 
Legislative  Assembly,  which  convened  on  December  6,  1841, 
there  was  no  further  investigation  of  the  affairs  of  the  bank 
by  the  Legislative  Assembly. 

SUSPENSION  OF  SPECIE  PAYMENTS 

On  March  29,  1841,  the  directors  of  the  Miners'  Bank 
adopted  a  series  of  resolutions  formally  suspending  specie 
payments.  Holding  that  there  was  no  cause  for  alarm 
regarding  the  condition  of  the  bank,  the  directors  attrib- 
uted the  necessity  for  suspension  to  the  practice  of  a  large 
St.  Louis  firm  which,  for  purpose  of  speculation,  discredited 
the  notes  of  the  Miners'  Bank  in  order  to  buy  them  at  a 


THE    MINERS'  BANK    OF    DUBUQUE  21 

discount  and  then  present  them  for  redemption  in  specie. 
This  unfair  practice  was  a  loss  to  the  ordinary  bill  holders 
and  an  expensive  operation  for  the  bank.  Accordingly  they 
announced  that  in  the  future  the  bank  would  pay  out  specie 
only  in  small  amounts  at  its  own  discretion.  As  evidence  of 
the  solvency  of  the  bank  and  its  desire  to  act  in  good  faith 
toward  the  creditors,  the  directors  promised  to  publish 
quarterly  statements  of  the  bank's  condition.  The  report 
accompanying  the  resolutions  showed  that  the  bank  was 
apparently  in  a  sound  condition.  Its  liabilities  exclusive  of 
capital  stock  and  profits  were  $106,654 — of  which  $97,005 
was  notes  in  circulation  and  $9649  was  deposits.  To 
meet  these  demands  the  bank  had  cash  of  $58,486.99 — of 
which  $40,051.99  was  ''Gold  and  Silver  on  hand."''^ 

ATTITUDE  OF  THE  FOURTH  LEGISLATIVE  ASSEMBLY 

In  the  Fourth  Legislative  Assembly  the  question  of  the 
Miners'  Bank,  its  condition  and  suspension,  became  a  live 
issue.  Bills  and  resolutions  regarding  it  were  of  three 
kinds:  first,  those  calling  for  another  investigation  by  a 
joint  legislative  committee ;  second,  those  calling  for  a  state- 
ment from  the  bank  of  its  condition  as  authorized  by  the 
charter ;  and  third,  bills  or  resolutions  requiring  the  bank  to 
resume  specie  payments. 

A  joint  resolution  authorizing  an  investigating  committee 
to  examine  the  affairs  of  the  bank  was  passed  by  the 
CounciP^  and  referred  to  the  House,  where  action  was  post- 
poned until  late  in  the  session.  The  resolution  was  never 
passed.  In  the  House  opponents  of  a  joint  investigating 
committee  favored  a  resolution  calling  for  a  sworn  state- 
ment from  the  bank  officials ;  but  such  a  resolution  failed  to 
pass.^*  In  the  Council  a  resolution  was  passed  on  February 
1,  1842,  requesting  the  cashier  of  the  bank  to  make  out  and 
furnish  to  the  Council  a  statement  of  its  affairs.  On  the 
same  date  a  statement  was  presented  to  the  Council  through 


22  HISTORY   OF    BANKING   IN    IOWA 

M.  Bainb ridge  giving  the  bank's  condition  as  of  January 
1,  1842.^^ 

This  statement  is  not  entirely  clear  and  does  not  reveal 
the  bank 's  exact  condition  as  regards  notes  outstanding  and 
specie  on  hand.  Among  the  liabilities  are  listed  bank  notes 
in  circulation  to  the  amount  of  $167,030 — an  increase  of 
$70,025  since  the  time  of  suspension  of  specie  payments  on 
March  29th  preceding.  In  addition,  there  is  an  item  of 
notes  on  special  deposit  with  other  banking  institutions 
amounting  to  $46,000.  Just  what  this  means  is  not  clear, 
but  it  seems  to  be  a  special  note  issue.  Instead  of  placing 
the  item  of  gold  and  silver  alone  on  the  balance  sheet,  the 
report  reads  ''Gold,  silver  and  notes  of  the  State  Bank  of 
Missouri  ....  $43,277.66."  If  there  were  no  more 
Bank  of  Missouri  notes  than  at  the  former  time,  the  specie 
was  practically  unchanged.  This,  however,  is  not  revealed 
by  the  balance  sheet.  At  any  rate,  because  of  the  increased 
liability  for  notes  outstanding,  the  relative  specie  reserve 
had  been  lessened. 

An  effort  to  compel  the  bank  to  resume  specie  payments 
was  also  made  in  both  branches  of  the  Legislative  Assembly. 
In  the  Council  a  bill.  Council  File  103,  was  passed  by  a  vote 
of  seven  to  six,  which  would  have  required  the  bank  to 
resume  specie  payments  by  August  1,  1842.*®  On  the  same 
day  on  which  this  bill  passed  its  second  reading  in  the 
Council,  the  House  of  Representatives  passed  a  similar  bill, 
House  File  79,  by  a  vote  of  fifteen  to  eleven.*'^  This  measure 
was  sent  to  the  Council  where  it  was  laid  on  the  table  indefi- 
nitely.*^ The  Council  bill  met  a  similar  fate  in  the  House  a 
few  days  later.**  A  joint  resolution  was  then  passed  by  the 
House  requiring  the  bank  to  *  *  stop  its  discounts  and  issues 
while  it  continues  to  suspend  specie  payment.  "'*®  This  was 
referred  to  the  Council,  and  at  its  first  reading  was  laid  on 
the  table.^^  Thus,  although  similar  bills  were  passed  by 
each  house  of  the  Legislative  Assembly  calling  for  a  re- 


THE    MINERS'  BANK   OF    DUBUQUE  23 

sumption  of  specie  payments  by  the  bank  before  August  1, 
1842,  no  bill  was  enacted  into  law. 

M.  Bainbridge  of  Dubuque  defended  the  bank  against  at- 
tacks in  the  legislature.  He  said  there  was  no  complaint  on 
the  part  of  the  people  of  the  community.  He  held  that  it  had 
paid  in  specie  long  after  all  other  Western  banks  had  sus- 
pended, and  explained  that  suspension  was  an  act  of  self- 
defense  against  St.  Louis  brokers.  The  bank,  he  maintained, 
paid  out  specie  to  farmers  when  they  needed  it  to  enter 
on  their  lands.^^  The  facts  do  not  seem  to  indicate  that  at 
this  time  the  credit  of  the  bank  was  as  high  as  Bainbridge 
said  it  was.  In  the  spring  of  1842  the  bank's  notes  fell  to 
a  low  point  in  the  chief  commercial  cities.  In  a  letter  to 
an  Iowa  friend  dated  February  28th,  a  gentleman  in  St. 
Louis  stated  that  notes  of  the  Miners'  Bank  of  Dubuque 
were  no  longer  received  in  that  city,  *  *  and  the  prevalent  im- 
pression is,  they  will  go  entirely  down."®* 

CHANGE  OF  OWNEESHIP 

In  June,  1842,  the  controlling  interest  in  the  bank  was 
bought  by  men  connected  with  the  St.  Louis  Gas  Light  Com- 
pany. The  new  cashier,  Mr.  Pearson,  had  been  one  of  the 
principal  clerks  in  the  employ  of  the  Gas  Light  Company, 
while  the  new  directors  were  all  prominent  business  men  of 
Dubuque.®^  From  testimony  given  at  a  later  legislative  in- 
vestigation it  is  learned  that  all  of  the  directors  were  quali- 
fied to  act  as  such  by  having  certificates  for  $50  of  bank 
stock  handed  to  them.  One  of  their  number,  Timothy  Davis, 
further  testified  that  he  intended  to  return  the  stock  when 
he  ceased  to  act  as  director.  In  July  an  effort  was  made  to 
resume  specie  payments,  $20,000  in  specie  having  been  de- 
posited in  a  Galena  bank  by  the  St.  Louis  Gas  Company. 
For  about  a  week  the  bank  did  redeem  its  notes.^® 

In  spite  of  these  efforts  at  restoration,  the  bank  does  not 
appear  to  have  carried  on  much  business  at  this  time.    In  an 


24  HISTORY   OF    BANKING   IN   IOWA 

Iowa  City  newspaper  in  December,  1842,  there  is  a  news 
item  to  the  effect  that  Thomas  Rogers  of  the  Dubuque  dele- 
gation intended  to  introduce  a  bill  to  repeal  its  charter. 
After  stating  this  fact  the  paper  says:  **It  is  pretty  well 
known  that  that  institution  is  not  at  present  doing  any 
business,  and  has  but  little  paper  afloat.  From  these  causes 
very  limited  interest  is  felt  on  the  subject  of  the  continuance 
of  its  charter. '  '^^ 

ATTEMPT  TO  EEPEAL  THE  CHAETEE 

In  the  Fifth  General  Assembly  of  the  Territory  of  Iowa, 
which  convened  at  Iowa  City  on  December  5,  1842,  the 
perennial  question  of  the  Miners'  Bank  came  up  early  in  the 
session.  A  bill  to  repeal  the  charter,  introduced  in  the 
House  of  Representatives  early  in  January,  1843,  was  re- 
ferred to  a  select  committee  consisting  of  one  member  from 
each  electoral  district.^^  Two  weeks  later  the  committee 
submitted  a  majority  and  a  minority  report.  Both  reports 
were  in  favor  of  repealing  the  bank 's  charter,  but  they  dif- 
fered upon  the  plan  to  be  followed  in  closing  up  the  affairs 
of  the  bank. 

The  majority  report  set  forth  three  distinct  points  upon 
which  the  bank  had  violated  its  charter:  (1)  it  had  com- 
menced issuing  notes  without  having  the  required  $40,000 
in  specie  paid  in;  (2)  it  had  on  its  board  of  directors  men 
who  were  not  bona  fide  stockholders;  and  (3)  it  had  sus- 
pended payment  of  specie  for  its  notes. 

The  minority  report  did  not  dissent  from  any  of  these 
charges,  and  the  evidence  submitted  supports  the  decision 
of  the  committee.  Witnesses  examined  were  J.  T.  Fales, 
Chief  Clerk  of  the  House  and  a  resident  of  Dubuque, 
Timothy  Davis,  a  bank  director,  and  M.  Mobley  of  Spring- 
field, Illinois,  who  had  been  employed  by  Dr.  Richard  Bar- 
rett and  Thomas  Mather,  principal  owners  of  the  bank,  to 
examine  the  condition  of  the  institution. 


THE    MINERS'  BANK    OF    DUBUQUE  25 

Mr.  Fales  testified  that  he  believed  "the  stock  subscribed 
was  never  paid  in  any  other  way  than  by  the  stockholders 
giving  their  notes  to  the  institution."  Mr.  Davis  also  testi- 
fied to  the  same  effect.  No  evidence  could  be  found  by  the 
committee  to  show  that  any  more  than  a  small  amount  was 
actually  paid  in  in  legal  coin  of  the  United  States. 

Upon  the  second  point  there  is  positive  testimony  from 
Mr.  Davis  that  he  had  not  invested  one  cent  in  the  institu- 
tion, but  had  been  given  a  certificate  for  $50  of  stock  paid 
in  to  qualify  him  to  act  as  a  director.  Moreover,  he  testified 
that  Messrs.  Farley,  Waples,  Quigley,  and  Wallard  were 
qualified  and  became  directors  in  the  same  manner  as  he  did. 

Upon  the  question  of  suspension  of  specie  payments  there 
was  likewise  no  doubt.  With  the  exception  of  about  a  w^eek 
in  July,  1842,  the  bank  had  not  redeemed  its  notes  in  specie 
since  March,  1841.  The  testimony  of  Mr.  Fales  shows  the 
resulting  depreciation.  He  said  that  in  the  store  of  Mr. 
Quigley,  one  of  the  directors,  he  had  been  paid  forty  cents 
on  the  dollar  for  the  notes,  in  spite  of  a  notice  in  the  store 
"Notes  of  the  Miners'  Bank  of  Dubuque,  taken  here." 
When  he  left  home  they  were  worth  from  thirty-seven  to 
forty  cents  on  the  dollar. 

A  bill  for  the  repeal  of  the  bank's  charter  passed  the 
House  by  a  unanimous  vote,^^  but  failed  of  passage  in  the 
Council.^^ 

CHAEGES  OF  BRIBERY 

While  the  bill  to  repeal  the  charter  of  the  bank  was  pend- 
ing in  the  legislature,  charges  were  made  in  the  Iowa  Capi- 
tal Reporter,  a  newspaper  published  in  Iowa  City,  that  cer- 
tain members  had  been  influenced  in  their  action  by  offers 
of  "personal  reward  and  private  advantage".  A  committee 
of  five  was  appointed  to  investigate  these  bribery  charges 
and  report  on  the  same.^*' 

On  the  first  of  February  this  committee  made  its  report. 


26  HISTORY    OF    BANKING    IN   IOWA 

They  had  investigated  the  matter  thoroughly  and  submitted 
a  mass  of  testimony  to  the  House.  The  first  witnesses  ex- 
amined were  the  editors  of  the  Iowa  Capital  Reporter^ 
Thomas  Hughes  and  Jesse  Williams.  From  them  the  com- 
mittee learned  that  letters  had  been  written  by  Dr.  Eichard 
Barrett  of  Springfield,  Illinois,  to  certain  members  of  the 
House  and  Council,  designated  by  name,  asking  them  to 
assist  in  saving  the  bank's  charter  until  such  time  as  he 
could  consummate  arrangements  to  buy  out  the  interests 
of  the  bankrupt  Gas  Light  Company  of  St.  Louis.  Included 
in  the  evidence  presented  were  four  letters  directed  to 
James  M.  Morgan,  Shepherd  Leffler,  Francis  Springer,  and 
William  Patterson — these  being  the  only  ones  received  by 
members  of  the  legislature  according  to  their  own  sworn 
testimony.  In  the  letter  to  Mr.  Morgan  there  are  offers  of 
private  and  local  advantage  in  case  the  charter  was  saved ; 
in  the  other  letters  there  was  no  suggestion  of  personal 
advantage,  but  merely  a  statement  of  the  purpose  of  Dr. 
Barrett  and  his  request  for  the  support  of  these  members 
to  save  the  bank's  charter  in  the  public  interest. 

The  resolutions  presented  by  a  majority  of  the  committee 
condemned  Dr.  Barrett  and  Mr.  Mobley,  who  had  delivered 
the  letters,  for  their  action  in  seeking  thus  to  influence  legis- 
lation. Mr.  Morgan  was  cleared  from  suspicion  and  his  ac- 
tions were  shown  to  be  free  from  influence.  The  Iowa  Capi- 
tal Reporter  was  denounced  for  having  made  a  charge 
' '  utterly  untrue  and  highly  reprehensible  in  its  character ' '. 
The  majority  of  the  committee,  therefore,  deemed  the 
editors  as  deserving  the  censure  of  the  House.  Upon  this 
point  a  minority  of  the  committee,  Greorge  Hefner  and 
Henry  Felkner,  disagreed.  They  believed  that  the  revela- 
tions were  of  an  alarming  nature  and  justified  the  editors 
in  being  suspicious  that  the  offers  might  not  have  been 
wholly  without  effect.  Furthermore,  they  did  not  believe 
such  censure  to  be  within  the  jurisdiction  of  the  House :  they 


THE    MINERS'  BANK    OF    DUBUQUE  27 

held  it  to  be  beyond  the  power  of  the  legislature  to  punish  or 
censure  an  individual  for  speaking  against  its  members. 
The  reports  of  both  the  majority  and  the  minority  were  laid 
on  the  table  and  no  further  action  taken.^^ 

Although  this  closed  the  official  action  on  the  bribery 
charges,  so  much  feeling  had  been  aroused  that  two  of  the 
principals  of  the  bribery  investigation  engaged  in  personal 
recrimination.  The  controversy,  indeed,  became  so  hot  that 
the  editor  of  the  Reporter,  Jesse  Williams,  was  given  a 
beating  by  George  H.  Walworth,  of  the  legislature,  in  the 
Capitol  library.  The  Iowa  City  newspapers  took  opposite 
sides,  the  Standard  sharply  criticizing  the  action  of  the 
Reporter  and  in  its  columns  graphically  writing  up  the 
thrashing  of  the  rival  editor.  There  was  no  effort  to  conceal 
the  fact  that  the  Standard  was  pleased  at  the  resulting  dis- 
grace.®^ 

OPPOSITION  IN  THE  SIXTH  LEGISLATIVE  ASSEMBLY 

Opposition  to  the  Miners'  Bank  was  again  manifest  early 
in  the  session  of  the  Sixth  Legislative  Assembly.  The  first 
bill  introduced  in  the  House  of  Eepresentatives  was  one  to 
repeal  the  bank's  charter.  When  called  up  a  few  days  later, 
the  bill  was  considered  in  Committee  of  the  Whole  and  re- 
ported to  the  House  for  passage.  Action  was  delayed  by  a 
motion  to  lay  the  bill  on  the  table  until  January  2nd  because 
information  had  been  received  that  memorials  relative  to 
the  bank  were  in  circulation  in  Dubuque  and  Jackson  coun- 
ties. This  motion  had  precedence  and  was  passed  by  a 
majority  of  one  vote.®^ 

As  soon  as  the  Legislative  Assembly  convened  after  its 
holiday  recess,  a  number  of  petitions  and  letters  of  instruc- 
tion to  county  delegations  were  received  by  the  House. 
Each  of  these  letters  of  instruction — one  signed  by  1172 
citizens  of  Des  Moines  County,  one  signed  by  173  citizens 
of  Clinton  County,  and  one  signed  by  213  Jackson  County 


28  HISTORY   OF   BANKING    IN   IOWA 

constituents — urged  the  respective  delegations  to  vote  for  a 
law  to  force  the  Miners'  Bank  either  to  resume  specie  pay- 
ments or  close  up  its  business.  On  the  other  hand,  a  peti- 
tion from  559  citizens  of  the  counties  of  Dubuque,  Delaware, 
and  Clayton  asked  that  more  time  be  given  the  bank  to 
resume  specie  payments.*'^ 

When  the  bill  came  before  the  House  for  discussion,  sev- 
eral attempts  were  made  to  amend.  These  amendments, 
amounting  in  one  or  tw^o  cases  to  a  new  bill,  provided  for 
the  continuation  of  the  bank's  charter  if  it  met  certain  con- 
ditions. The  first  of  these  amendments  would  have  forced 
the  bank  to  mortgage  to  the  State  $400,000  worth  of  land  to 
secure  the  payment  of  its  notes.  This  was  rejected,  but  later 
a  vigorous  fight  was  made  to  save  the  bank's  charter  by 
amending  with  a  similar  land  mortgage  clause.  Finally, 
amendment  having  proved  futile,  the  bill  was  brought  to  a 
vote  in  substantially  its  original  form.  This  called  for  the 
repeal  of  the  bank's  charter  and  the  winding  up  of  its 
affairs,  and  the  vote  stood  eighteen  to  seven  in  favor  of  such 
action.*'^ 

An  interesting  suggestion  appears  in  a  petition  from 
Iowa  City  presented  by  Thomas  Rogers  on  the  day  fol- 
lowing the  vote  but  before  the  final  engrossment  of  the  bill. 
In  this  petition  the  legislature  was  asked  to  resuscitate  the 
bank, ' '  Provided,  that  the  Stockholders  cause  to  be  paid  into 
the  ofiice  of  the  Secretary  of  the  Territory  the  sum  of 
$10,000,  as  a  bonus;  the  said  sum  to  be  appropriated  for  the 
encouragement  of  the  emigration  of  marriageable  females 
from  New  England  to  this  Territory.  "^^ 

The  bill  for  the  repeal  was  sent  at  once  to  the  Council 
and  was  there  referred  to  a  select  committee.  Petitions 
were  also  submitted  to  the  Council  by  citizens  of  various 
counties.  The  report  of  the  select  committee  substituted 
a  new  bill — with  the  exception  of  the  enacting  clause — which 
would  have  compelled  the  bank  to  resume  specie  payments 


THE    MINERS'  BANK    OF    DUBUQUE  29 

within  thirty  days  and  have  made  its  notes  redeemable  at 
par  in  gold  or  silver  in  Burlington,  St.  Louis,  and  New  York, 
as  well  as  at  the  bank  at  Dubuque. 

When  this  bill  was  later  considered  by  the  Council,  strin- 
gent amendments  were  added.  The  President,  directors, 
and  stockholders  w^ere  made  individually  liable  to  the  note 
holders  in  case  of  failure  of  the  bank  to  pay  specie  for. its 
notes.  This  was  an  unconditional  and  unlimited  personal 
liability  of  stockholders.  A  further  amendment  prohibited 
the  bank  from  importing  and  vending  in  the  Territory  bills 
of  less  denomination  than  $5.  In  its  final  form  the  bill 
passed  the  Council  by  a  vote  of  ten  to  three.*^'  The  House 
bill  had  provided  for  immediate  repeal  of  the  bank's  char- 
ter; while  the  amended  bill  which  passed  the  Council  gave 
the  bank  thirty  days  in  which  to  resume  specie  payments, 
and,  if  it  did  so  and  continued  in  business,  provided  for  a 
sound  form  of  regulation.  The  notes  that  this  bill  would 
have  permitted  the  bank  to  circulate  would  have  been  far 
superior  to  many  notes  then  circulating  in  the  Territory. 
But  when  the  amended  bill  was  presented  in  the  House,  that 
body  refused  to  concur  by  a  vote  of  fourteen  to  eleven.^^ 
The  bill  was  returned  to  the  Council  where  it  was  laid  on  the 
table  until  "the  Fourth  of  July  next".*^^ 

Thus  closed  the  legislative  record  for  another  session. 
Again  it  seemed  to  have  been  the  desire  of  both  branches  of 
the  Assembly  to  take  action,  but  they  failed  to  get  together 
on  a  bill. 

EESUMPTION  OF  SPECIE  PAYMENTS 

When  the  legislature  had  adjourned  its  session,  the  bank 
did  on  its  own  initiative  what  the  legislators  failed  to  re- 
quire of  it :  on  April  19, 1844,  it  resumed  the  payment  of  its 
liabilities  in  specie.  Thereafter,  until  the  repeal  of  its 
charter  and  final  closing,  the  bank  "promptly  met  all  its 
liabilities."    This  resumption  came  after  a  change  in  the 


30  HISTORY    OF    BANKING    IN    IOWA 

management  and  control  of  the  bank — M.  Mobley  of  Spring- 
field, Illinois,  being  the  new  cashier  J® 

The  extent  to  which  the  public  gained  by  this  resumption 
is  not  clear.  The  Iowa  Capital  Reporter,  an  anti-bank 
paper,  charged  that  the  new  owners  could  adopt  this  course 
with  perfect  safety  to  themselves,  because  they  had  pur- 
chased, through  their  agents,  all  of  the  outstanding  liabil- 
ities of  the  bank.  In  so  doing,  it  was  claimed,  they  realized 
a  considerable  profit  by  purchasing  these  obligations  "at  a 
discount  of  75  or  80  per  cent. '  '^^  There  is  not  sufficient  evi- 
dence to  prove  the  truth  or  falsity  of  this  charge.  The 
extreme  partisanship  manifested  by  the  anti-bank  faction 
leads  one  to  discount  the  statement  somewhat.  On  the  other 
hand,  it  is  unlikely  that  foreign  stockholders  would  put  a 
defunct  institution  on  its  feet  primarily  for  the  benefit  of  its 
creditors.  Moreover,  the  probability  of  a  legislative  repeal 
of  the  bank's  charter  was  so  great  that  conservative  in- 
vestors would  not  have  risked  much  on  its  future.  What- 
ever may  have  been  the  motive,  resumption  at  this  time  did 
not  restore  the  bank  to  the  popular  favor. 

EEPEAL  OF  THE  BANK'S  CHAETEE 

One  of  the  first  bills  brought  before  the  House  of  Repre- 
sentatives in  the  Seventh  Legislative  Assembly  was  for  the 
repeal  of  the  charter  of  the  Miners'  Bank.  No  further 
charges  were  made  against  the  bank  at  this  time.  There  was 
a  recital  of  the  former  illegal  practices  of  the  bank  and  a 
statement  of  the  authority  by  which  the  legislature  might 
repeal  the  charter.  In  conferring  upon  the  stockholders 
their  corporate  powers  and  privileges,  the  legislature  had 
reserved  to  itself  and  its  successors  the  right  *Hhat  if  said 
corporation  ....  shall  abuse  or  misuse  their  privi- 
leges under  this  charter,  it  shall  be  in  the  power  of  the  legis- 
lative assembly  of  this  territory,  at  any  time,  to  annul,  va- 
cate and  make  void  this  charter. ' '" 


THE    MINERS'  BANK    OF    DUBUQUE  31 

The  bill  for  the  repeal  of  the  bank's  charter  was  passed 
unanimously  by  the  House  and  concurred  in  by  the  Council 
by  a  vote  of  eleven  to  one.  It  became  law  without  the  sig- 
nature of  the  Governor  on  May  21,  1845,  and  was  to  take 
effect  twenty  days  after  its  passage.  According  to  the  pro- 
visions of  the  bill,  the  judge  of  the  third  judicial  district  was 
empowered  to  appoint  two  trustees  with  full  power  to  settle 
the  affairs  of  the  bank.  Certain  points  as  to  the  manner 
of  settlement  were  specified,  among  which  was  the  provision 
that  notes  of  the  bank  must  be  accepted  at  par  in  payment  of 
all  debts  due  to  the  bank.  This  is  evidence  that  bill  holders 
were  probably  not  losers  in  the  final  settlement.'^^ 

Before  the  trustees  were  appointed  the  directors  of  the 
bank  issued  an  address  to  the  people  of  Iowa  as  a  protest 
against  the  action  of  the  legislature.  It  consisted  largely  of 
an  historical  review  of  the  operations  of  the  bank.  The 
action  of  the  bank  in  suspending  specie  payments  is  espe- 
cially defended.  With  a  single  exception  every  bank  west  of 
the  Alleghanies  had  suspended.  It  was  pointed  out  that  the 
first  suspension  was  made  long  after  most  other  banks  in 
the  West  had  suspended  and  only  because  of  the  unfair 
action  of  note  speculators.  The  bank  resumed  payments 
about  a  year  later  and  its  directors  maintained  that  it  could 
have  sustained  them  but  for  disappointment  over  a  draft. 
The  directors  very  justly  claimed  that  the  legislature  was 
unfair  in  attacking  it — especially  since  at  the  same  time  it 
failed  to  pay  a  debt  of  $5500  plus  interest  due  from  the  Ter- 
ritory. In  1842  this  debt  amounted  to  $6000  or  $7000,  which 
if  paid  would  have  enabled  the  bank  to  continue  specie  pay- 
ments.'^^  The  address  closes  with  the  statement  that  the 
officers  would  not  submit  to  the  action  of  the  legislature 
without  a  fight,  and  before  the  directors  gave  possession  to 
the  trustees  they  intended  to  settle  the  matter  in  the  courts.'^^ 

This  threat  was  later  carried  out.  In  August,  1845,  Judge 
Wilson  appointed  Benjamin  Rupert  and  John  G.  Shields 


32  HISTORY    OF    BANKING    IN    IOWA 

trustees  to  settle  up  the  affairs  of  the  bank.^'^  The  directors 
refused  to  turn  over  the  property  of  the  bank  to  the  trustees 
and  suit  was  brought  in  the  November,  1845,  term  of  the  dis- 
trict court.  By  a  rejoinder  the  bank  raised  the  point  that 
the  legislative  act  was  passed  without  notice  to  them  and 
without  any  evidence  of  abuse  or  misuse  of  their  corporate 
powers  and  privileges.  To  this  the  plaintiffs  filed  a  de- 
murrer which  was  sustained  by  the  court.  The  case  was 
appealed  by  the  bank  directors  to  the  Supreme  Court  of  the 
Territory  of  Iowa,  where  the  decision  of  the  lower  court  was 
sustained.'^ '^ 

The  case  was  then  submitted  to  the  district  court  for  trial 
upon  the  question  of  the  constitutionality  of  the  repeal  of  its 
charter.  Here  the  repeal  was  held  to  be  constitutional,  and 
again  the  case  was  appealed.  In  the  July,  1848,  term  of  the 
Supreme  Court  of  Iowa,  the  decision  of  the  lower  court  was 
once  more  upheld,"^^  with  the  result  that  the  trustees  were 
given  legal  possession  of  the  bank.  In  the  three  intervening 
years,  however,  the  affairs  of  the  bank  had  been  settled  and 
it  had  ceased  to  exist.  On  February  25, 1849,  the  final  meet- 
ing of  the  directors  was  held  to  close  up  their  connection 
with  the  bank.'^^ 

In  looking  back  upon  the  career  of  the  Miners'  Bank  it 
is  difficult  to  judge  to  what  extent  it  was  marked  by  mis- 
management and  fraud  and  how  far  it  was  the  victim  of  the 
disturbed  economic  and  political  conditions  of  the  times.  It 
seems  rather  clear  that  at  the  time  of  organization  the  bank 
did  not  comply  with  the  charter  requirements  regarding 
stock  payments  and  specie  holdings.  Its  suspension  in 
1841  appears  to  have  come  at  a  time  when  it  was  in  reason- 
ably sound  condition  and  to  have  been  due  largely  to  the 
financial  conditions  of  the  period.  From  that  time  on  its 
record  was  rather  doubtful.  It  filled  its  board  with  ''dum- 
my" directors  in  order  to  meet  the  residence  requirement 


THE    MINERS    BANK    OF    DUBUQUE  33 

of  the  charter ;  it  was  guilty  of  making  improper  offers  to 
members  of  the  legislature ;  and  it  promoted  the  circulation 
of  notes  of  neighboring  ''wild  cat"  institutions — but  these 
would  doubtless  have  found  their  way  into  the  circulating 
medium  of  the  Territory  without  its  aid. 

The  loss  to  the  community  through  depreciation  of  the 
bank's  notes  can  not  be  accurately  estimated.  It  is  certain 
from  testimony  given  at  one  of  the  investigations  that  the 
notes  feU  as  low  as  forty  cents  on  the  dollar.  In  the  report 
of  the  investigating  committee  of  1843  it  was  stated  that  the 
bank  had  made  arrangements  with  the  land  office  by  which 
the  bills  were  to  be  received  in  payment  for  land  to  ' '  some 
small  extent."  Whatever  losses  were  experienced  must 
have  fallen  largely  upon  the  bill  holders,  for  deposits  never 
constituted  a  considerable  portion  of  the  liabilities  of  the 
bank.  At  the  time  of  suspension  of  specie  payments  in 
1841,  at  the  high  point  in  the  bank's  career,  the  published 
statement  showed  individual  deposits  of  only  a  little  over 
$6000  as  compared  to  $97,000  of  notes  in  circulation.^** 

In  the  early  opposition  to  the  Miners'  Bank  of  Dubuque 
there  is  no  evidence  of  party  alignment.  Personal  and  local 
considerations  were  manifested  in  the  votes.  But  later 
opposition  became  a  party  issue.  In  the  debates  regarding 
the  proposed  repeal  of  the  bank's  charter  in  the  Fourth 
Legislative  Assembly  (1842),  the  attitude  of  the  parties  was 
first  clearly  brought  out.  The  business  of  bam  ing  was  as 
much  the  object  of  attack  as  was  this  particular  bank.  While 
party  lines  were  ignored  at  times  during  this  and  the  subse- 
quent session  of  the  Legislative  Assembly,  in  the  final  vote 
taken  in  the  Sixth  Assembly  party  lines  were  strictly  ad- 
hered to.  The  bill  before  the  House  of  Eepresentatives 
called  for  the  immediate  closing  of  the  bank ;  and  in  the  final 
vote  the  eighteen  Democrats  voted  for  the  passage  of  the 
bill,  while  the  seven  Whigs  voted  against  it.^^  In  the  Coun- 
cil the  Whigs  held  the  balance  of  power,  and  the  action  there 


34  HISTORY   OF   BANKING   IN   IOWA 

favored  extension  of  the  bank's  charter  on  condition  that  it 
resume  specie  payments  in  thirty  days.  This  was  inter- 
preted by  the  opponents  of  the  bank  as  a  defense  of  banking 
as  such  as  well  as  an  attempt  to  save  the  Dubuque  institu- 
tion. The  repeal  of  the  bank's  charter  by  the  Seventh  Leg- 
islative Assembly  was  almost  unanimous,  only  one  vote 
being  registered  against  it  in  both  houses.  The  Democratic 
majority  was  by  this  time  quite  overwhelming. ^^ 


ni 

PKOHIBITION  OF  BANKING 

During  the  Territorial  period  unsuccessful  attempts  were 
made  to  secure  bank  charters  for  at  least  three  different 
institutions.  In  December,  1838,  certain  citizens  of  Jackson 
County  petitioned  the  House  for  a  charter  for  a  bank  to  be 
established  at  Charleston  in  that  county.^^  The  petition 
was  referred  to  the  Committee  on  Incorporations  and  never 
heard  of  again.  A  second  attempt  was  made  to  establish 
a  bank  in  1842,  this  time  at  Davenport  in  Scott  County.  The 
bill  for  incorporation  was  defeated  in  the  House  by  a  vote  of 
twenty-one  to  two.^*  At  the  session  of  the  Seventh  Legis- 
lative Assembly  in  1845,  a  petition  was  presented  in  the 
House  of  Representatives  asking  the  legislature  to  charter 
the  Bank  of  Iowa  in  Iowa  City.  This  was  to  have  been  a 
stock  bank  with  the  right  of  note  issue.  The  bill  to  incorpo- 
rate the  bank  was  referred  to  a  special  committee  from 
which  it  never  emerged.®^ 

In  order  to  restrain  unincorporated  banking  associations 
from  issuing  notes,  the  Territorial  legislature  passed  an  act 
in  1838  making  unlawful  the  issue  of  notes  or  bank  bills  by 
individuals  or  firms,  a  penalty  of  $1000  for  each  offense 
being  fixed  by  the  law.®^ 

In  the  history  of  the  Miners'  Bank,  therefore,  there  is 
far  more  than  a  record  of  a  typical  western  bank  of  its 
period.  During  the  years  of  Iowa 's  Territorial  history,  the 
struggle  went  on  between  those  who  would  deny  to  any 
form  of  bank  the  right  of  existence  and  those  who  favored 
banking  with  proper  regulation.  The  members  of  the  jury 
were  the  qualified  electors  of  the  Territory  of  Iowa:  and 
their  verdict  will  be  found  in  the  vote  on  the  Constitution 
which  made  Iowa  a  State  in  1846. 

35 


36  HISTORY    OF    BANKING   IN   IOWA 

THE  CONSTITUTIONAL  CONVENTION  OF  1844 

When  the  Territory  of  Iowa  was  established  in  1838  it  had 
been  prophesied  that  it  would  soon  become  a  State.  The 
movement  for  statehood  was  first  given  official  endorsement 
by  Governor  Lucas  in  his  message  to  the  Legislative  Assem- 
bly which  met  at  Burlington  on  November  4, 1839.  Support 
was  not  lacking  for  his  proposal,  but  there  was  also  strong 
opposition  to  the  establishment  of  a  State  governn^nt  at 
that  time.  Perhaps  the  leading  objection  concerned  the 
matter  of  expense — the  fear  that  the  burden  of  taxation 
would  be  too  heavy  if  the  limited  number  of  inhabitants 
undertook  to  support  a  State  government.  After  consider- 
able agitation  and  failure  of  the  earlier  attempts  to  secure 
a  majority  of  voters  in  support  of  calling  a  constitutional 
convention,  a  convention  was  finally  authorized  by  the  peo- 
ple at  the  election  of  April,  1844.^'^ 

On  Monday,  October  7,  1844,  the  delegates  met  in  Iowa 
City  to  formulate  a  State  constitution.  Several  days  of  the 
rather  short  session  of  the  convention  were  devoted  to  a 
discussion  of  the  question  of  corporations  in  general  and  of 
banks  in  particular.  The  bank  issue  had  been  a  large  factor 
in  national  politics  and  one  of  the  most  important  points  of 
division  between  Whigs  and  Democrats.  The  business  of 
the  convention  was  divided  among  eleven  standing  commit- 
tees.^^ On  October  11,  1844,  the  Committee  on  Incorpora- 
tions reported,  majority  and  minority  reports  being  pre- 
sented. The  majority  report  provided  that  one  bank  might 
be  established  in  the  State  with  branches  not  to  exceed  one 
for  every  six  counties.  The  regulations  under  which  it 
might  be  created  were  stringent  and  included  among  others 
the  following  provisions :  first,  the  bill  establishing  the  bank 
and  branches  must,  after  passage  by  the  legislature  and 
approval  by  the  Governor,  be  submitted  to  the  people  for 
approval  or  rejection;  second,  one-half  the  capital  must  be 
paid  in  gold  or  silver  before  the  bank  would  be  permitted  to 


PROHIBITION    OF    BANKING  37 

commence  operation ;  third,  no  note  or  bill  should  be  issued 
of  a  denomination  less  than  ten  dollars;  fourth,  the  stock- 
holders must  be  liable  without  limit  for  all  debts ;  fifth,  the 
bank  must  pay  its  notes  and  promises  on  demand  or  forfeit 
its  charter;  and  finally,  the  legislature  must  reserve  the 
right  to  alter,  amend,  or  repeal  the  charter. 

To  the  banker  of  the  present  day  some  of  these  provisions 
would  seem  onerous  and  unnecessary,  but  to  the  minority 
members  of  the  committee  and  to  a  considerable  following  in 
the  convention  the  restrictions  seemed  to  be  too  lenient. 
The  report  submitted  by  the  minority  members  was  brief 
but  clean  cut:  ''No  bank  or  banking  corporation  of  discount, 
or  circulation,  shall  ever  be  established  in  this  State." 
This  was  signed  by  Stephen  Hempstead  (later  Governor  of 
the  State)  and  Michael  0'Brien.«» 

On  October  19th  the  report  came  before  the  convention 
for  consideration.  A  motion  by  Stephen  Hempstead  to 
strike  out  the  majority  report  and  insert  the  minority  report 
called  forth  lively  and  extended  debate.^^  In  this  debate 
there  is  evidence  of  the  attitude  toward  banking  then  prev- 
alent. Mr.  Hempstead  opened  the  debate  in  opposition  to 
banks.  He  described  three  kinds  of  banks:  banks  of  de- 
posit, banks  of  discount,  and  banks  of  circulation.  It  was 
to  the  banks  of  circulation  that  he  objected.  He  pointed  out 
that  such  banks  loaned  their  credit  and  not  money ;  that  the 
right  to  issue  notes  enabled  them  to  loan  two  or  three  times 
the  amount  they  possessed.  Holding  that  the  banks  did 
nothing  to  create  capital,  he  considered  the  loaning  of  their 
credit  as  usury. 

Mr.  Hempstead's  analysis  of  the  function  of  note  issue  is 
correct.  Upon  the  second  point,  however,  he  was  undoubt- 
edly in  error ;  for,  while  a  bank  may  not  serve  directly  in  the 
production  of  wealth,  it  has  been  amply  demonstrated  that 
a  properly  conducted  bank  plays  a  very  important  role  in 
promoting  the  prosperity  of  a  community.     Mr.  Hemp- 


38  HISTORY   OF    BANKING   IN   IOWA 

stead's  inability  to  see  any  good  in  banks  is  a  commentary 
upon  the  banking  practice  of  the  time.  In  the  course  of  his 
remarks  he  described  the  practice  of  a  group  of  Massachu- 
setts banks  in  which  the  specie  required  by  law  was  assem- 
bled from  all  the  banks  and  sent  from  one  bank,  as  soon  as 
it  had  been  inspected  by  the  bank  commissioners,  to  the  next 
one  in  order  of  inspection,  the  same  coin  thus  serving  for 
all.  The  practices  in  banking  circles  at  that  time,  as  de- 
scribed by  other  writers,  would  lead  us  to  believe  that  Mr. 
Hempstead's  story  was  no  exaggeration. 

As  another  evil  of  banking  Mr.  Hempstead  pointed  to  the 
inflation  of  prices  resulting  from  a  large  increase  in  the 
circulating  medium  with  a  consequent  lessening  of  its  value. 
Property  acquired  thereby  a  fictitious  value,  speculation 
was  stimulated,  and  extravagance  encouraged.  He  held 
that  there  would  be  less  fluctuation  if  only  gold  and  silver 
were  used  as  money.  It  is  probably  true,  as  Mr.  Hempstead 
argued,  that  many  of  the  financial  evils  of  the  preceding 
decade  had  been  due  to  the  abuse  of  banking  privileges.  He 
feared  that  the  evils  so  common  in  contemporary  banking 
practice  could  not  be  eliminated  from  the  proposed  State 
bank. 

The  arguments  and  the  position  of  Mr.  Hempstead  must 
be  judged  in  the  light  of  the  banking  practices  of  the  day; 
viewed  in  this  way,  he  can  hardly  be  classed  as  unreasonable 
in  his  attitude.  Some  members  went  even  further  in  de- 
nouncing banking.  Eichard  Quinton  of  Keokuk  County 
classed  all  banks  as  a  "  set  of  swindling  machines ' '.  Some 
of  the  delegates  professed  to  favor  a  bank  of  some  kind — 
just  what,  they  did  not  specify — ^but  they  were  opposed  to 
the  plan  presented  by  the  majority  report  of  the  committee. 
Still  others  wished  to  leave  the  question  to  the  decision  of 
the  legislature  to  be  elected  under  the  terms  of  the  Consti- 
tution, Certain  members  announced  that  they  were  under 
instructions  from  their  constituents  to  favor  a  bank  and 


PROHIBITION   OF    BANKING  39 

would  therefore  cast  a  favorable  vote,  though  in  doing  so 
they  were  acting  contrary  to  their  own  convictions.  A  final 
effort  was  made  to  split  on  party  lines.^^  The  Democrats, 
the  anti-bank  party,  outnumbered  the  Whigs  fifty-one 
to  twenty-one.  Although  considerable  party  feeling  was 
aroused,  the  vote  was  not  along  party  lines.  The  motion  to 
substitute  the  minority  report,  placing  a  total  prohibition 
of  banking  in  the  organic  law  of  the  State,  was  lost  by  a  vote 
of  seventeen  to  fifty-one.** 

After  extended  debate  and  numerous  roll  calls  on  amend- 
ments to  the  banking  section,  it  appeared  evident  that  the 
constitutional  convention  was  not  prepared  to  formulate 
the  details  of  a  plan  for  a  bank.  At  the  same  time  there  was 
unwillingness  to  have  the  Constitution  left  open  on  this 
matter.  Distrust  of  the  legislature  was  evidently  at  the 
bottom  of  the  attempt  to  include  details  in  a  document 
which  should  be  a  flexible  instrument.  The  only  reason  for 
placing  greater  confidence  in  the  results  of  the  convention 
would  seem  to  have  been  that  the  action  of  the  convention 
required  ratification  by  popular  vote.  But  to  have  sub- 
mitted a  detailed  Constitution  to  the  people  for  ratification 
would  have  resulted  in  losing  the  banking  plan  in  a  maze 
of  other  questions  equally  important  and  difficult.  The 
members  of  the  legislature  were  to  be  chosen  by  the  same 
electors  as  had  voted  for  the  members  of  the  convention. 
This  body  could  have  devised  a  banking  act  and  submitted  it 
to  the  people  in  definite  form,  if  it  were  desirable  to  secure 
popular  ratification.  The  public  attention  could  then  be 
focused  upon  that  question  alone  and  an  adequate  expres- 
sion of  public  opinion  gained  by  such  a  referendum. 

When  it  became  evident  that  the  convention  was  in  hope- 
less disagreement  over  the  entire  matter,  a  select  committee 
of  seven  was  appointed  to  bring  in  a  new  report.^^  The  rec- 
ommendations of  this  committee  favored  the  rejection  of  the 
former  report  and  the  substitution  therefor  of  a  provision 


40  HISTORY    OF   BANKING   IN   IOWA 

that  the  legislature  should  create  no  bank  or  banking  insti- 
tution or  corporation  with  banking  privileges  in  this  State 
unless  the  charter,  with  all  its  provisions,  be  approved  by 
a  majority  of  votes  at  a  general  election.®^  This  met  the 
contention  that  the  question  should  not  be  left  entirely  to 
the  discretion  of  future  legislatures  and  avoided,  on  the 
other  hand,  the  necessity  for  providing  at  that  time  the 
detailed  regulations  for  banking. 

The  discussion  thereafter  centered  on  the  section  of  the 
amended  report  which  provided  unlimited  liability  for  stock- 
holders of  all  corporations.  Ebenezer  Cook  of  Davenport 
contended  that  the  convention  had  gone  as  far  as  it  intended 
to  go  when  it  applied  unlimited  liability  to  stockholders  of 
corporations  with  banking  privileges.  Certain  other  mem- 
bers also  argued  that  a  distinction  should  be  made  between 
banks  and  general  corporations  in  this  respect.  These  mem- 
bers were  anxious  to  attract  manufacturing  industries,  rail- 
roads, and  other  industrial  enterprises  to  the  State  they 
were  building.  Ordinarily  the  capital  required  for  such 
projects  would  necessitate  the  corporate  form  of  organiza- 
tion ;  but,  it  was  asserted,  investors  would  be  deterred  from 
putting  their  money  into  an  enterprise  where  there  was  an 
unlimited  liability.^  ^ 

This  debate  is  of  especial  interest  as  an  early  attempt  to 
differentiate  between  the  stockholders  of  banks  and  those 
of  other  corporations.  To-day  the  almost  universal  prac- 
tice is  to  make  the  liability  heavier  for  stockholders  in  bank- 
ing corporations.  Most  States  have  followed  the  national 
banking  law  in  this  respect  and  have  prescribed  double  lia- 
bility for  stockholders  in  banks.  But,  in  spite  of  the  efforts 
of  the  more  liberal  members,  the  corporation  article  as 
finally  passed  contained  a  section  placing  unlimited  liability 
on  the  stockholders  of  all  corporations. 

The  section  of  the  corporation  article  relating  especially 
to  banks  provided  that  the  legislature  should  not  create  a 


PROHIBITION  OP  BANKING  41 

bank  or  banking  institution  unless  the  charter  with  its  pro- 
visions should  be  submitted  to  a  vote  of  the  people  at  a 
general  election  and  be  endorsed  by  a  vote  of  the  electors. 
The  State  was  prohibited  from  becoming  a  stockholder  di- 
rectly or  indirectly  in  any  bank  or  other  corporation.®*' 

In  order  to  make  valid  the  work  of  the  constitutional  con- 
vention, approval  of  Congress  and  ratification  by  the  elec- 
tors of  the  Territory  were  necessary.  Congress  found  no 
objection  to  the  proposed  Constitution,  but  materially  re- 
duced the  area  included  within  the  new  State.  This  reduc- 
tion was  strongly  opposed  by  the  inhabitants  of  the  Terri- 
tory. When  submitted  to  the  voters  of  Iowa,  the  Constitu- 
tion was  twice  defeated.  Although  there  was  considerable 
partisan  objection  to  the  Constitution  aside  from  the  change 
of  boundaries  by  Congress,  it  is  likely  that  its  defeat  was 
due  principally  to  the  boundary  question.  At  any  rate  there 
is  little  evidence  that  the  banking  section  was  a  decisive 
factor  in  bringing  about  its  defeat.^'^ 

THE  CONSTITUTION  OF  1846 

In  spite  of  the  rejection  of  the  Constitution  of  1844,  the 
people  of  the  Territory  of  Iowa  were  desirous  of  statehood. 
Governor  James  Clarke  had  served  as  a  delegate  in  the  Con- 
vention of  1844.  Although  his  attitude  was  favorable  to 
State  organization  he  took  no  active  steps  to  secure  it.  But 
the  Legislative  Assembly  in  1845-1846  was  ready  to  act,  and 
so  authorized  an  election  of  delegates  for  another  cbnstitu- 
tional  convention.  At  the  township  elections  in  April  thirty- 
two  delegates  were  selected  to  meet  at  Iowa  City  on  the  first 
Monday  of  May,  1846.  This  time  the  draft  of  the  Constitu- 
tion as  prepared  by  the  convention  was  to  be  submitted  to 
the  people  for  ratification  or  rejection  before  its  presenta- 
tion to  Congress.  In  this  way  it  was  hoped  that  changes 
by  Congress — which  had  resulted  in  the  rejection  of  the 
Constitution  of  1844 — would  be  forestalled.®^ 


42  HISTORY   OF    BANKING   IN   IOWA 

The  election  of  delegates  proceeded  along  party  lines  in 
spite  of  the  efforts  of  the  Whigs  to  secure  a  non-partisan 
selection.  In  all  of  the  Democratic  nominating  conventions 
the  delegates  were  instructed  to  vote  against  banks.®^  In 
the  discussions  and  resolutions  of  these  conventions  the 
party  attitude  concerning  banking  was  vigorously  stated.^ *^^ 
The  election  returns  gave  the  Democrats  twenty-two  dele- 
gates out  of  the  total  number  of  thirty-two^°^  thus  assuring 
them  a  working  majority  in  the  convention  and  a  large  num- 
ber of  delegates  who  were  unfriendly  to  banking  interests. 

On  May  4,  1846,  the  convention  assembled  at  Iowa  City 
and  continued  in  session  just  fifteen  days.  The  report  of 
the  Committee  on  Incorporations  contained  a  positive  pro- 
hibition of  corporations  ''with  banking  or  discounting  privi- 
leges. ' '  A  futile  effort  was  made  to  substitute  for  this  rec- 
ommendation an  amendment  which  would  leave  the  whole 
matter  of  corporations  to  the  future  legislatures.^ ^^  By  a 
union  of  Whigs  and  the  more  moderate  anti-bank  Democrats 
a  substitute  for  the  section  prohibiting  banking  was  passed 
which  would  have  enabled  future  legislatures  to  create  bank- 
ing corporations  by  law,  provided  the  law  in  question  was 
first  submitted  to  the  people  for  confirmation.  This  sub- 
stitute was  amended  so  as  to  require  publication  of  the  act 
for  at  least  twelve  successive  weeks  in  at  least  twelve  weekly 
newspapers  of  the  State,  at  the  expense  of  the  applicant  for 
a  charter,  before  it  could  be  submitted  to  a  vote.  Finally, 
after  further  discussion  and  amendment,  the  entire  report 
was  struck  out  and  by  a  vote  of  twenty-one  to  nine  was  re- 
placed by  two  sections  which  became,  with  a  change  only  in 
paragraphing,  the  ''Article  on  Incorporation"  that  was 
finally  approved  by  the  convention.^ *'^  Once  more  the  power 
to  establish  banks  was  taken  out  of  the  hands  of  the  mem- 
bers of  the  legislature  and  a  definite  prohibition  of  banking 
was  made  a  part  of  Iowa's  fundamental  law. 


PROHIBITION   OF   BANKING  43 

BANKING  PEOHIBITED 

Article  IX  in  the  Constitution  of  1846  dealt  with  incorpo- 
rations and  read  as  follows : 

1.  No  corporate  body  shall  hereafter  be  created,  renewed,  or  ex- 
tended, with  the  privilege  of  making,  issuing,  or  putting  in  circu- 
lation, any  bill,  check,  ticket,  certificate,  promissory  note,  or  other 
paper,  or  the  paper  of  any  bank,  to  circulate  as  money.  The  Gen- 
eral Assembly  of  this  State  shall  prohibit,  by  law,  any  person  or 
persons,  association,  company  or  corporation,  from  exercising  the 
privileges  of  banking,  or  creating  paper  to  circulate  as  money. 

2.  Corporations  shall  not  be  created  in  this  State  by  special  laws, 
except  for  political  or  municipal  purposes,  but  the  General  Assem- 
bly shall  provide,  by  general  laws,  for  the  organization  of  all  other 
corporations,  except  corporations  with  banking  privileges,  the  crea- 
tion of  which  is  prohibited.  The  stockholders  shall  be  subject  to 
such  liabilities  and  restrictions  as  shall  be  provided  by  law.  The 
State  shall  not,  directly  or  indirectly,  become  a  stockholder  in  any 
corporation.^*** 

When  the  Constitution  of  1846  was  before  the  people  for 
ratification  the  bank  clause  came  in  for  considerable  discus- 
sion. The  Democrats  had  a  large  majority  among  the  voters 
of  Iowa,  and  they  were  emphatic  in  their  support  of  the 
prohibition  of  banking.  In  an  article  on  this  feature  the 
Iowa  Capital  Reporter  maintained  that  the  convention  had 
been  doubly  instructed  to  insert  a  prohibitory  clause  against 
banking — ''first,  by  the  rejection  of  the  instrument  which 
did  not  prohibit  them — and  secondly,  by  the  most  unequi- 
vocal expressions  of  the  people  at  their  primary  assemblies 
and  through  the  ballot  box."  This  mandate  the  delegates 
had  heeded,  for  in  the  final  vote  on  Article  IX  not  a  single 
Democrat  had  opposed  prohibition.^ •^^ 

Opposition  to  the  Constitution  was  not  confined  to  this 
article,  but  there  was  considerable  feeling  especially  among 
the  Whigs  upon  this  issue.    In  an  editorial  comment  on  the 


44  HISTORY    OF    BANKING    IN    IOWA 

Constitution,  The  Iowa  Standard  (Whig)  urged  the  voters 
to  meet  the  issue  of  bank  or  no  bank  by  rejecting  the  whole 
Constitution.  In  case  they  deemed  it  more  expedient  to 
vote  for  the  Constitution,  the  voters  were  urged  to  endorse 
on  their  ballots  that  they  ^^ except  the  Ninth  Article."  In 
this  way  they  would  place  themselves  on  record  as  being  in 
favor  of  amendment  as  soon  as  the  ratification  by  Congress 
granted  the  coveted  statehood.^**® 

The  arguments  of  Wm.  Penn  Clarke,  in  an  address  to  the 
electors  of  Johnson  and  Muscatine  counties,  clearly  set  forth 
the  effects  which  would  follow  the  prohibition  of  banking. 
He  stated  that  inhibition  of  banks  would  not  be  inhibition 
of  bank  paper :  it  would  only  substitute  a  foreign  for  a  home 
currency,  one  not  subject  to  the  laws  of  Iowa.  Opponents 
of  banking  urged  ''hard  money",  but  Mr.  Clarke  prophesied 
that  under  existing  conditions  they  would  get  a  currency 
''well  mixed"  in  which  notes  of  banks  having  no  credit  at 
home  would  predominate.  He  believed  that  so  long  as  other 
States  had  banks  and  bank  paper,  Iowa  could  best  protect 
herself  from  foreign  notes  by  establishing  banks  of  her  own. 
From  local  institutions  would  emanate  notes  controlled  by 
Iowa  legislation,  and  these  banks  would  aid  in  driving  out 
foreign  notes.  Failure  to  provide  banks  would  permit 
Iowa  to  become  the  "plunder  ground  of  all  the  Banks  in 
the  Union,  "i*^"^ 

By  a  narrow  margin  the  Constitution  of  1846  was  ac- 
cepted by  the  voters  at  the  August  election.  Congress 
accepted  the  instrument,  and  on  December  28,  1846,  the 
State  of  Iowa  was  admitted  into  the  Union.^*'^  For  nearly 
twelve  years  the  prohibition  of  banking  contained  in  the 
State  Constitution  remained  in  force ;  and  during  that  time 
the  forebodings  of  Wm.  Penn  Clarke  were  fully  realized. 


IV 

FRONTIER  BANKING  IN  IOWA 

1846-1858 

When  Iowa  entered  the  Union  in  1846  the  census  gave  the 
population  of  the  State  as  102,388.  At  that  time  twenty- 
nine  counties  were  organized,  and  these  were  located  mainly 
in  the  eastern  third  of  the  State.  During  the  first  decade 
of  statehood  seven  enumerations  were  taken,  including  the 
Federal  census  of  1850.  Most  of  these  were  more  or  less 
incomplete  and  inaccurate,  but  they  reveal  fairly  well  the 
rapid  growth  of  the  new  State  in  population  and  economic 
resources.  By  1856  the  population  had  reached  517,875 — 
nearly  all  the  present  counties  reporting  inhabitants.  In- 
deed, only  a  few  counties  in  the  northwestern  part  of  the 
State  were  without  settlements. 

Great  waves  of  immigration  had  swept  in  from  the  older 
States — especially  from  Pennsylvania,  New  York,  Ohio,  and 
the  New  England  States.  Moreover,  the  failure  of  the  revo- 
lutionary movements  of  1848  in  Europe  increased  the  cur- 
rent of  foreign  immigration  to  America,  and  Iowa  attracted 
a  fair  share  of  these  people.  The  increase  of  population  and 
the  development  of  the  Commonwealth  was  checked  some- 
what by  a  severe  crop  failure  in  1858,  but  it  was  clear  to  all 
that  Iowa  was  destined  to  become  a  well-populated  and 
prosperous  section.  This  expectation  was  soon  fully  re- 
alized, for  within  a  decade  after  the  close  of  the  Civil  War, 
nearly  a  million  and  a  half  persons  were  resident  in  Iowa. 

If  the  increase  in  population  was  remarkable,  even  more 
noteworthy  was  the  development  of  the  agricultural  and  in- 
dustrial resources  of  the  State.  The  acreage  in  farms  in 
1850  was  2,736,064 ;  by  1856  it  had  more  than  trebled,  total- 

45 


46  HISTORY    OF   BANKING   IN   IOWA 

ing  8,559,437.  And  the  production  of  cereals  also  kept  pace 
with  this  growth.  The  wheat  yield  in  1855  was  more  than 
three  times  as  much  as  in  1849.  Corn  production  during  the 
same  time  increased  from  8,656,799  bushels  to  31,163,362 
bushels.  Oats  yielded  nearly  four  times  as  much  in  the 
latter  year  as  in  the  former.  In  1849  only  276,120  bushels 
of  potatoes  were  produced,  while  in  1855  the  output  was 
2,014,388  bushels.  Butter,  cheese,  and  meat  production 
show  an  increase  no  less  marked.  Large  production  was 
accompanied  by  exceptionally  high  prices  during  1855-1856 
because  the  Crimean  War  had  cut  off  Russia  from  the  mar- 
kets of  Western  Europe. 

Even  though  then  as  now  Iowa  was  primarily  an  agricul- 
tural State,  the  beginning  of  manufacturing  is  discerned. 
This  branch  of  industry,  which  at  the  time  of  the  census  of 
1840  was  almost  non-existent,  yielded  products  valued  at 
$3,773,075  in  1850  and  $14,289,015  in  1860.  In  1854  the  first 
railroad  was  completed  between  Lake  Michigan  and  the 
Mississippi  River  opposite  Davenport ;  and  in  the  following 
year  the  first  locomotive  entered  the  State.^"^ 

INHIBITION  OF  BANKING 

It  might  be  expected  that  during  this  time  banks  would  be 
developing  pari  passu  with  the  growth  of  the  State.  That 
this  was  not  the  case  is  due  to  the  fact  that  the  course  of 
normal  banking  development  was  blocked  by  the  corporation 
article  of  the  Constitution  of  1846. 

It  is  difficult  to  determine  accurately  the  real  purpose  of 
the  authors  of  the  clause  of  the  Constitution  prohibiting  the 
creation  of  corporations  with  banking  privileges.  Unques- 
tionably the  main  purpose  was  to  prevent  banks  of  issue,  but 
whether  or  not  the  framers  of  the  Constitution  intended  to 
strike  at  banks  of  discount  and  deposit  is  not  so  certain. 
The  function  of  note  issue  occupied  the  chief  place  in  the 
public  thought  concerning  banks.     It  was  as  note-issuing 


FRONTIER   BANKING  47 

institutions  that  they  played  the  greatest  part  in  the  eco- 
nomic life  of  the  community;  and  so  in  those  days  it  was 
regarded  as  virtually  equivalent  to  a  prohibition  against 
banking  to  prohibit  the  issuing  of  circulation  of  any  kind.^^" 
The  evils  of  ''wild  cat"  banking  had  become  so  intolerable, 
however,  that  absolute  prohibition  seemed  the  only  safe 
course.  That  Iowa  was  not  alone  in  adopting  this  method  of 
checking  the  evils  is  shown  by  the  fact  that  in  1852  there 
were  nine  States  and  the  District  of  Columbia  in  which 
banking  was  illegal.^" 

In  the  debates  in  the  constitutional  convention  some  of 
the  strongest  opponents  of  banking  made  a  distinction  be- 
tween banks  of  issue  and  banks  of  deposit  and  discount. 
No  exception  in  favor  of  banks  of  discount  or  deposit  was 
made,  however,  in  the  language  of  the  Constitution  of  1846. 
If  the  proper  interpretation  may  be  judged  from  a  resolu- 
tion passed  by  the  Democratic  convention  held  in  Iowa  City 
on  September  24,  1846,  it  appears  that  the  people  wished 
to  prohibit  all  forms  of  banking.  Eeferring  to  the  vote  on 
the  Constitution  which  had  been  taken  on  August  3rd  pre- 
ceding, the  platform  makers  held  that  this  is  *'a  decisive 
indication  of  public  sentiment  against  all  banking  institu- 
tions of  whatever  name,  nature,  or  description.  "^^^ 

The  opposite  interpretation  may  be  arrived  at  from  the 
first  sentence  of  the  article  on  corporations,  in  which  the 
prohibition  rests  upon  banks  or  corporations  issuing  some 
form  of  circulating  medium.  No  record  can  be  found  of  a 
court  ruling  upon  the  point  of  what  was  included  under 
banking  privileges  in  Iowa  from  1846-1858.^^^ 

Uncertainty  is  likewise  reflected  in  the  legislation  of  the 
period.  Before  1846  the  practice  in  Iowa  had  been  to  grant 
charters  to  corporations  by  special  act  of  the  legislature. 
Under  the  terms  of  the  State  Constitution  that  practice  was 
specifically  prohibited  so  far  as  corporations  for  profit  were 
concerned.    The  legislature  was  directed  to  pass  a  general 


48  HISTORY    OP    BANKING   IN   IOWA 

incorporation  law — an  action  taken  early  in  the  session  of 
1847.  Since  the  Constitution  had  definitely  forbidden  cor- 
porations with  banking  privileges,  there  is  nothing  in  this 
law  that  specifically  concerns  banks.^^^  It  may  be  inferred 
from  the  number  of  private  institutions  which  sprang  up 
during  the  decade  after  1846  that  prospective  bankers  were 
either  unable  to  see  any  advantage  in  incorporation  or  else 
were  very  doubtful  as  to  the  possibility  of  incorporation. 
No  action  appears  to  have  been  taken  by  the  legislature  to 
supplement  the  prohibitory  clause  of  the  Constitution  until 
the  enactment  of  the  Code  of  1851. 

One  section  of  this  Code  prohibits  the  formation  of  bank- 
ing associations  with  the  privilege  of  issuing  circulation. 
Any  person  becoming  a  subscriber  to,  member  of,  or  in  any 
manner  interested  in,  such  associations  or  company  was 
liable  to  fine  and  imprisonment.  Directors  of  any  incorpo- 
rated company  which  used  any  of  its  funds  to  aid  in  putting 
out  circulation  were  also  liable  to  the  same  penalty.  Notes 
given  to  any  company  violating  these  sections  were  void. 
Finally,  it  was  provided  that,  *'No  person,  association,  or 
corporation,  shall  issue  any  bills,  drafts,  or  other  evidences 
of  debt  to  be  loaned  or  put  in  circulation  as  money  or  to  pass 
or  to  be  used  as  a  currency  or  circulating  medium;  and 
every  person,  association,  or  corporation,  and  every  member 
thereof,  who  violates  the  provisions  of  this  section  shall  be 
punished  by  a  fine  not  exceeding  one  thousand  dollars.  "^^^ 

Of  course  in  a  progressive  young  State  financial  institu- 
tions were  inevitable.  Realizing  the  demand  for  some  kind 
of  banking  facilities,  keen  business  men  were  quick  to  meet 
the  need  by  the  establishment  of  unauthorized  private  bank- 
ing houses.  The  origins  of  these  early  banks  are  difficult 
to  trace,  for  in  most  cases  they  go  back  to  a  commission 
business,  a  land  agency,  a  law  office,  a  general  store,  or  other 
recognized  business.  At  first  merely  one  department  of  the 
general  business,  banking  eventually  became  so  important 


FRONTIER   BANKING  49 

that  the  other  features  were  eliminated,  and  banking  became 
the  sole  business. 

EAELY  BANKS  IN  THE  MISSISSIPPI  EIVEK  TOWNS 

In  the  early  days  of  statehood  the  larger  towns  of  the 
State  were  located  along  the  Mississippi  River,  and  in  them 
is  found  the  beginnings  of  private  banking.  It  would  be 
interesting  to  describe  in  detail  these  beginnings,  but  scar- 
city of  data  makes  this  impossible.  Such  records  as  are 
available,  however,  afford  considerable  information  con- 
cerning the  earliest  banks  and  some  interesting  pictures  of 
the  banking  of  that  day.  Of  contemporary  accounts,  the 
story  of  early  banking  by  Major  Hoyt  Sherman,  a  pioneer 
banker  of  Des  Moines,  takes  high  rank.  He  states  that  the 
only  institutions  that  could  be  called  regular  banks  in  the 
early  fifties  were  located  in  the  river  towns.  He  names 
Charles  Parsons,  of  Keokuk;  Coolbaugh  and  Brooks,  of 
Burlington;  Greene  and  Stone,  of  Muscatine;  Cook  and 
Sargent,  of  Davenport;  W.  J.  Barney  and  Co.,  and  Lang- 
worthy  Bros.,  of  Dubuque. ^^^ 

The  honor  of  being  the  oldest  established  bank  in  Iowa  is 
now  claimed  by  the  National  State  Bank  of  Burlington. 
Located  on  the  Mississippi,  the  city  of  Burlington  is  one  of 
the  oldest  towns  in  the  State;  it  was  the  temporary  capital 
of  the  original  Territory  of  Wisconsin  and  the  first  capital 
of  the  Territory  of  Iowa.  Until  1860  it  was  the  largest  city 
in  Iowa.  The  National  State  Bank  traces  its  lineage  back 
to  F.  J.  C.  Peasley  who  was  doing  a  banking  business  in  con- 
nection with  a  forwarding  and  commission  business  in  the 
year  1842  or  possibly  earlier.^^^  This  institution  with  nu- 
merous changes  in  organization  has  been  in  continuous 
existence  since  that  time.  Probably  its  banking  business 
was  not  the  most  important  in  that  early  day.  In  the  local 
paper  of  the  time  is  found  an  advertisement  of  '  *  Francis  J. 
C.  Peasley,  Forwarding  and  Commission  Merchant,  Water 


50  HISTORY    OF    BANKING    IN    IOWA 

Street".  Although  no  reference  is  made  to  the  banking 
business,^  ^^  the  claim  of  the  National  State  Bank  to  being 
the  oldest  of  Iowa  banks  can  probably  not  be  successfully 
disputed.  In  the  early  fifties  its  successor,  Coolbaugh  and 
Brooks,  was  a  prominent  institution  which  in  1858  became 
one  of  the  original  branches  of  the  State  Bank  of  Iowa. 

Banking  in  Davenport  originated  in  1847  in  connection 
with  a  general  land  agency  conducted  by  Cook  and  Sargent. 
This  firm  early  took  a  high  place  among  the  banks  of  the 
State  and  was  considered  one  of  the  strongest  banks  in  the 
Northwest.  Branches  were  established  at  Iowa  City  and 
Fort  Des  Moines.  One  contemporary,  writing  at  a  later 
date,  describes  them  as  the  *'Pierpont  Morgans  of  the 
day"."^  In  May,  1857,  the  firm  moved  into  a  handsome  new 
three-story  limestone  building  costing  $75,000  which  was 
said  at  the  time  to  be  the  finest  bank  building  west  of  New 
York  City.  The  second  bank  in  Davenport  was  the  firm  of 
Macklot  and  Corbin,  established  in  1852.  Austin  Corbin 
later  became  President  of  the  First  National  Bank  of  Dav- 
enport which  was  the  first  national  banking  association  to 
commence  operations  in  the  United  States.^ ^^ 

Early  banking  at  Dubuque  centered  about  the  Miners' 
Bank.  After  the  repeal  of  its  charter  in  1845  other  banking 
institutions  soon  appear  to  have  developed  but  the  records 
concerning  them  are  uncertain  and  contradictory.  The  first 
of  these  seem  to  have  originated  in  1849  under  the  names  of 
Finley  Burton  and  Company,  and  Jesup  and  Stimson.  M. 
Mobley,  W.  J.  Barney  and  Company,  and  Langworthy 
Brothers  date  from  the  early  fifties.^  ^^  These  three  insti- 
tutions, together  with  the  firms  of  F.  S.  Jesup  &  Company, 
Taylor,  Eichards  &  Burden,  and  Herron  Brothers,  are 
listed  in  the  Dubuque  City  Directory  of  1856-1857.  Dubuque 
appears  to  have  furnished  an  early  example  of  a  financial 
district  within  the  city,  for  these  six  banks  were  all  situated 
near  together  on  Main  Street.^  ^^ 


FRONTIER   BANKING  51 

George  C.  Anderson  appears  to  have  been  the  pioneer 
banker  of  Keokuk.  He  conducted  his  banking  business  in 
connection  with  a  wholesale  grocery  and  supply  house. 
First  opened  in  1846,  the  bank  was  conducted  as  a  broker's 
office.  Later  Mr.  Anderson  devoted  his  entire  time  to  bank- 
ing until  his  death  in  1867.  In  1852  Charles  Parsons  opened 
the  second  bank  in  Keokuk.^  ^^ 

Lyons  was  the  pioneer  seat  of  banking  in  Clinton  County. 
A.  C.  Root  in  1845  established  a  private  bank  there  and  this 
bank  was  later  merged  into  the  First  Natonal  Bank  of 
Lyons.^2* 

At  Muscatine  banking  seems  to  have  developed  first  in  a 

store  operated  by  Greene  and  Stone.    Joseph  Greene  was 

engaged  in  the  mercantile  business  in  the  early  forties. 

About  1851  this  business  house  became  the  first  bank  of  the 

city,  and  it  continued  to  operate  until  the  panic  of  1857, 

when  it  failed,  its  business  being  soon  afterwards  liquidated. 

The  second  bank  at  Muscatine  was  opened  by  Isett  and 
Brewster.^  25 

The  first  bank  at  Fort  Madison  was  established  in  1854 
as  a  branch  of  the  banking  house  of  E.  H.  Thomas  and  Com- 
pany of  Burlington.  It  was  bought  by  Knapp  and  Eaton  in 
1856,  became  a  branch  of  the  State  Bank  of  Iowa  in  1858, 
and  was  succeeded  in  1865  by  the  Fort  Madison  National 
Bank.126 

EAELY  BANKS  IN  THE  INTEEIOE  TOWNS 

Banking  facilities  developed  in  the  interior  towns  in  very 
much  the  same  way  as  at  the  Mississippi  Eiver  points.  Iowa 
City  was  the  State  capital  until  1857,  and  here  the  pioneer 
bankers  appear  to  have  been  the  firms  of  Cook,  Sargent,  and 
Downey — a  branch  of  the  Davenport  firm  of  Cook  and  Sar- 
gent— Culbertson  and  Reno,  and  J.  H.  Gower  Brothers  and 
Company.  Dealing  in  exchange,  making  collections,  and 
handling  land  warrants  were  features  of  their  early  busi- 
ness.   Scholte   and   Grant  at  Pella  and   Charruaud   and 


52  HISTORY    OF    BANKING    IN    IOWA 

Nichols  at  Newton  were  bankers  in  other  localities  whose 
advertisements  early  appeared  in  the  newspapers  of  the 
capital  city.^2'^ 

The  pioneer  bankers  in  Cedar  Rapids  were  the  firm  of 
Weare,  Finch,  and  Company,  whose  business  dates  back  to 
1850  or  1851.  An  indication  of  the  capital  required  by  the 
pioneer  banker  is  given  by  the  fact  that  S.  D.  Carpenter 
was  offered  a  fourth  interest  in  the  firm  for  $500.  He  would 
gladly  have  bought  in  as  a  partner,  but  found  it  impossible 
to  raise  the  $500.  By  the  practice  of  his  profession  as  a 
physician  and  land  speculation  on  the  side  he  was  able  to 
accumulate  enough  to  become  a  partner  in  a  firm  of  bankers 
a  few  years  later.  The  second  Cedar  Rapids  bank  was 
started  by  Ward  and  Bryan  in  1852  or  1853,  but  because 
B.  S.  Bryan  bought  a  new  top  buggy  and  a  fine  horse  public 
suspicion  was  aroused  and  the  bank  was  forced  to  close  its 
doors.  The  original  firm  of  Weare,  Finch,  and  Company 
soon  became  the  firm  of  Greene  and  Weare.  This  institu- 
tion grew  rapidly  and  established  branches  in  Des  Moines, 
Council  Bluffs,  Omaha,  Fort  Dodge,  Sioux  City,  and  other 
lowai  points.  Later  it  controlled  one  of  the  famous  Iowa- 
Nebraska  banks.  It  alone  of  the  Cedar  Rapids  banks  sur- 
vived the  first  shock  of  the  panic  of  1857.  All  the  others 
failed  ''for  want  of  money ".^^^ 

At  Des  Moines  and  Fort  Des  Moines  the  early  banking 
firms  as  given  in  a  list  of  banks  in  Iowa  published  in  1855 
were  Cook,  Sargent,  and  Cook;  Greene,  Weare,  and  Rice; 
Macklot,  Corbin,  and  White;  and  Hoyt  Sherman  and  Com- 
pany.^ ^^  A  prominent  banker  of  Des  Moines  was  B.  F. 
Allen,  whose  banking  house  was  opened  in  1855.  Allen  and 
Sherman  were  apparently  the  leading  local  men  in  Des 
Moines  to  engage  in  the  banking  business — the  other  banks 
being  identified  with  institutions  in  other  cities.  These  men 
later  organized  the  Des  Moines  branch  of  the  Iowa  State 
Bank.130 


FRONTIER   BANKING  53 

The  earliest  bank  at  Waterloo  was  opened  in  1854  by 
A.  P.  Hosford  and  Edmund  Miller.  A  little  later  John  H. 
Leavitt  established  a  private  banking  house,  which  after- 
wards became  the  Leavitt  and  Johnson  National  Bank.^-^^ 
W.  H.  Tuthill  at  Tipton,  Henn  Williams  and  Company  at 
Fairfield,  and  Norman  Everson  at  Washington,  were  other 
bankers  in  interior  towns  whose  business  was  established 
before  ISSS.^^^ 

There  is  no  pretense  that  the  above  list  includes  all  in- 
terior banks  established  prior  to  1855,  but  those  mentioned 
are  some  of  the  more  important  pioneer  private  banks. 

EARLY  BANKS  IN  THE  MISSOURI  RIVER  TOWNS 

The  Missouri  River  towns  of  most  interest  in  pioneer  days 
were  Council  Bluffs  and  Sioux  City.  Council  Bluffs  was 
the  gateway  to  the  western  gold  fields  through  which  hun- 
dreds of  immigrants  passed.  Near  there,  too,  the  Mormons 
settled  before  moving  on  to  their  Utah  home.  It  was  an 
important  river  point,  and  in  1853  the  United  States  land 
office  was  opened  in  the  city.  Very  shortly  afterwards  the 
first  bank  appeared.  This  was  a  branch  of  the  Cedar  Rapids 
firm  of  Greene  and  Weare,  the  firm  being  known  as  Greene, 
Weare,  and  Benton.  The  firm  of  Officer  and  Pusey,  a  bank- 
ing institution  prominent  in  the  subsequent  history  of  the 
city,  seems  to  have  been  established  about  the  same  time, 
for  there  is  an  account  of  its  moving  its  place  of  business  in 
1856.    By  1856  five  banks  were  located  in  Council  Bluffs.^-'^ 

Sioux  City's  first  bank  was  also  connected  with  the  well- 
known  firm  of  Greene  and  Weare.  In  1855  United  States 
land  registry  offices  were  opened  in  Fort  Dodge  and  Sioux 
City.  George  Weare,  a  younger  brother  of  John  Weare  of 
Cedar  Rapids,  was  sent  out  to  represent  the  banking  firm. 
After  a  month  in  Fort  Dodge,  Mr.  Weare  moved  on  to  Sioux 
City  via  Council  Bluffs.  He  arrived  in  his  new  location  the 
day  after  Christmas,  1855.     The  bank  which  Mr.  Weare 


54  HISTORY   OF    BANKING   IN   IOWA 

started  was  opened  in  the  log  house  in  which  Dr.  S.  P. 
Yeomans,  the  register,  was  conducting  the  government  land 
office.  The  front  room  on  the  ground  floor,  a  room  about  12 
by  15  feet,  was  the  land  office ;  Dr.  Yeomans 's  family  occu- 
pied the  rear  of  the  building ;  and  in  the  second  story  of  this 
house  Mr.  Weare  established  his  bank.  His  capital  consisted 
of  $1000  in  gold  and  some  land  warrants ;  and  his  equipment 
was  a  dry  goods  box  for  a  counter  * '  and  a  tin  box  about  the 
size  of  a  woman's  cake  box  for  a  safe."  By  the  summer  of 
1857  there  were  seven  banks  in  Sioux  City.  There  is  one 
other  claimant  for  the  distinction  of  being  the  first  bank  in 
Sioux  City.  The  firm  of  Cassady,  Myers,  and  Moore 
opened  an  office  in  October,  1855.  Its  name  was  soon  after- 
wards changed  and  its  business  seems  to  have  been  more  on 
the  order  of  that  of  a  modern  real  estate  office.  George 
Weare  lived  to  celebrate,  as  President  of  the  Iowa  State 
National  Bank,  his  semi-centennial  as  a  banker  in  Sioux 
City;  and  the  bank  which  he  founded  became  one  of  the 
prominent  institutions  in  northwestern  Iowa  and  one  of  the 

oldest  banks  in  the  State  under  one  continuous  manage- 
ment.^34 

FUNCTIONS  OF  THE  PIONEER  BANKS 

The  early  banks  of  Iowa  numbered  among  their  most  im- 
portant functions  transactions  connected  with  real  estate. 
Often  they  were  little  more  than  real  estate  agencies  at  the 
outset.  The  government  lands  in  Iowa  were  being  opened 
for  purchasers  at  $1.25  per  acre.  Land  warrants  had  been 
granted  to  veterans  of  the  War  of  1812,  the  Mexican  War, 
and  Indian  wars ;  and  these  warrants  were  bought  and  sold 
on  the  eastern  exchanges  at  eighty-five  to  ninety  cents  an 
acre.  They  were  acceptable  at  a  government  land  office  in 
payment  for  land  at  $1.25.  The  banker  usually  included 
land  warrants  among  his  assets,  for  one  of  his  leading  oper- 
ations was  ' '  entering  land  on  time ' '.    While  land  was  sold 


FRONTIER   BANKING  55 

by  the  government  to  the  settler  for  $1.25  per  acre,  pay- 
ments must  be  in  cash  and  only  specie  was  accepted  under 
the  terms  of  the  Specie  Circular  of  1836.  The  banker  pur- 
chased the  land  from  the  government  at  the  regular  rate 
and  sold  it  to  the  speculator  or  settler  usually  at  $1.75  per 
acre  on  one  year 's  time.  His  profit  on  the  transaction  was 
thus  forty  per  cent  in  addition  to  what  he  may  have  made 
on  the  warrants.  G.  L.  Tremain,  first  President  of  the 
Iowa  Bankers  Association,  stated  that  he  borrowed  $200  on 
160  acres  of  land  for  which  he  paid  $320  at  the  end  of  the 
year.  H.  W.  Sanford,  the  banker  from  whom  he  had  made 
the  purchase,  had  entered  on  the  land  with  Mexican  War 
land  warrants,  making  the  cost  to  him  only  fifty  cents  per 
acre.^^^ 

In  the  boom  days  of  new  towns  banks  literally  appeared 
in  a  night.  S.  D.  Carpenter  of  Cedar  Rapids  describes  a 
trip  to  Fort  Dodge  with  John  Weare,  Jr.,  presumably  in  the 
fall  of  1855  just  after  the  opening  of  the  land  office  at  that 
place.  They  found  there  seven  banks  in  full  operation,  one 
of  which  was  operating  in  a  tent.  In  the  early  days  in  Sioux 
City  the  banks  were  ready  to  undertake  anything  that  per- 
tained to  land  business.  One  or  two  institutions  advertised 
* '  surveying  done ' ',  while  one  house  had  a  civil  engineer  and 
would  do  anything  from  running  a  road  to  building  a  bridge. 
It  would  pay  taxes,  collect  debts,  or  sell  a  farm.^^^ 

A  second  very  profitable  function  of  the  early  banks  was 
dealing  in  exchange.  The  government  required  payment  for 
land  in  gold.  Eastern  drafts  of  land  buyers  were  an  excel- 
lent investment.  The  land  buyer  was  required  to  pay  a 
good  round  sum  for  the  gold.  Merchant  customers  regarded 
the  eastern  drafts  very  highly  and  would  pay  well  for  them 
in  order  to  make  the  necessary  settlement  for  goods  pur- 
chased. During  the  opening  years  of  their  careers  most  of 
these  frontier  banks  were  not  in  a  position  to  provide  east- 
ern exchange  regularly.    Major  Sherman  says  a  call  upon 


56  HISTORY    OF    BANKING    IN    IOWA 

the  typical  Iowa  banker  of  the  early  fifties  for  a  New  York 
draft  would  have  been  '* received  with  a  stare  of  astonish- 
ment, or  treated  as  a  feeble  joke.  "^^^  By  1856,  however,  the 
Iowa  City  bankers  were  advertising  to  buy  and  sell  bills  of 
exchange  on  all  the  principal  cities  of  the  United  States  and 
Europe.^^^ 

A  third  function  carried  on  by  the  pioneer  Iowa  banker 
was  collecting  notes  and  bills,  paying  taxes  for  non- 
residents, and  investing  in  land  for  eastern  customers. ^^® 
The  deposit  business  was  very  meagre.  In  the  time  inter- 
vening between  his  arrival  at  the  settlement  and  his  pur- 
chase of  land,  the  land  buyer  sometimes  left  his  money  with 
the  banker.  The  Sioux  City  banks  advertised  that  they 
would  pay  ten  per  cent  for  money  which  was  deposited  with 
them  for  thirty  days  or  longer.  The  firm  of  J.  H.  Gower 
Brothers  and  Company  of  Iowa  City  offered  the  "extra" 
inducement  of  ten  per  cent  interest  on  special  deposits  for 
three  months  or  more.  This  was  in  1856,  however,  when  the 
earlier  pioneer  stage  was  over.  Some  of  the  banks  asked 
ten  days'  notice  before  paying  regular  certificates  of  de- 
posit.^ ^"^  The  tent  bank  that  Dr.  Carpenter  described  in  his 
visit  to  Fort  Dodge  advertised  that  it  would  pay  ten  per  cent 
on  current  deposits.  Whether  or  not  the  probable  stability 
of  the  institution  was  questioned  by  prospective  depositors 
does  not  appear  from  the  record. 

The  discount  of  notes  and  commercial  bills  of  exchange, 
which  forms  so  large  a  part  of  the  business  of  the  modern 
bank,  was  not  an  important  function  of  the  newly  organized 
Iowa  banks.  Major  Hoyt  Sherman  says  that  a  call  upon  the 
pioneer  bank  for  a  discount  would  have  been  regarded  with 
astonishment.^  ^^  Before  the  end  of  the  period  under  dis- 
cussion, however,  the  older  Iowa  banks  were  carrying  on  a 
regular  deposit  and  discount  banking  business.  Another 
activity  which  was  a  necessary  part  of  the  early  bankers' 
business  was  the  dealing  in  all  kinds  of  current  and  non- 


FRONTIER   BANKING  57 

current  money ;  but  the  treatment  of  this  phase  of  their  work 
can  best  be  reserved  until  we  examine  the  currency  situation 
existing  in  the  new  State. 

EQUIPMENT  OF  THE  EARLY  BANKS 

The  banking  office  of  the  middle  of  the  last  century  would 
not  be  recognized  as  such  by  people  of  the  twentieth  century. 
To-day  we  recognize  a  bank  on  first  sight  by  a  number  of 
distinguishing  features ;  but  in  the  early  part  of  the  latter 
half  of  the  nineteenth  century,  the  bank  did  not  differ  exter- 
nally from  other  places  of  business.  The  office  was  gen- 
erally in  a  cheap  and  ordinary  one-story  frame  or  brick 
building  with  few  doors  and  windows.  The  building  con- 
sisted of  one  and  sometimes  two  rooms.  In  the  front  room, 
a  plain,  wide  counter  of  pine  or  black  walnut  separated  the 
banker  from  his  customer.  Little  furniture  was  found  in 
these  early  banks :  in  general  a  couple  of  chairs,  a  stove,  a 
table,  and  a  standing  desk  were  sufficient.  There  were  no 
individual  cages  for  each  employee,  for  often  there  was  but 
one  man  who  was  the  president,  cashier,  teller,  bookkeeper, 
and  janitor.  Neither  were  there  mahogany  furnished  wait- 
ing rooms  for  the  comfort  of  the  bank's  customers.  Anyone 
who  wished  to  sit  down  might  use  the  counter  as  a  seat. 
There  were  no  private  rooms  into  which  one  might  withdraw 
and  hold  business  conferences — for  these  one  might  retire 
to  the  corner  of  the  building  most  remote  from  the  counter. 
In  the  bank  of  to-day  the  heavy  steel  safe  with  its  time  lock 
and  ingenious  combinations  may  be  located  in  that  part  of 
the  building  which  is  considered  to  be  most  nearly  burglar- 
proof  and  all  precautions  are  taken  to  protect  it.  Contrast 
in  imagination  the  modern  vault  with  the  banker's  strong 
box  of  that  generation,  which  has  been  graphically  described 
in  the  following  words : 

That  was  the  safe — the  gorgeously  painted  and  decorated  sheet- 
iron  safe — in  which  the  treasures  of  the  bank  were  nightly  stored 


58  HISTORY   OF    BANKING   IN   IOWA 

....  the  treasures  and  trusts  were  given  in  charge  of  that  won- 
derful box,  which  would  offer  no  more  resistance  to  the  modern  bur- 
glar than  if  constructed  of  pine.  The  simple  but  unbounded  confi- 
dence with  which  the  banker  in  those  primitive  times  nightly  placed 
all  his  treasure  in  that  safe,  located  in  a  cheap,  pine  shanty,  and 
retired  to  his  "peaceful  couch",  was  the  very  sublimity  of  faith. 
It  needed  only  a  visit  to  a  neighboring  blacksmith  shop  for  a  cold 
chisel,  or  to  a  carpenter  shop  for  even  a  hatchet,  as  the  only  tools 
necessary  for  the  enterprising  burglar  to  force  the  outer  door  or 
window,  then  cut  through  the  thin  sheet-iron  outer  casing  of  the 
formidable  safe,  then  the  plaster  filling  and  slight  wooden  interior 
work,  and  all  the  coveted  treasures  were  within  his  reach ;  but  for- 
tunately the  bank  burglar  of  those  days  did  not  follow  the  advice 
of  Mr.  Greeley  to  "Go  West",  perhaps  because  he  had  a  suspicion 
that  it  would  prove  too  "poor  picking ".^*^ 

The  routine  of  business  was  likewise  far  different.  Bank- 
ing hours  were  longer  and  specialization  of  functions  was 
unknown.  It  frequently  happened  that  one  man  performed 
all  the  duties  of  the  institution.  One  bank  is  described 
where  the  banker  loaned  and  took  in  money  in  the  front 
room  and  fried  eggs  for  his  dinner  in  the  back  room.**' 

GENERAL  STATE  OF  THE  CUREENCY 

The  currency  in  Iowa  during  the  period  preceding  the 
Civil  "War  was  typicalof  the  condition  that  then  obtained  in 
the  West.  There  were  no  banks  of  issue  located  in  Iowa,  but 
several  nearby  States  had  banks  of  issue  which  flooded  Iowa 
with  their  depreciated  notes.  The  ''free  banking"  system 
was  adopted  in  Illinois  in  1851,  in  Indiana  in  1852,  and  in 
Wisconsin  in  1853.^^^  Under  this  plan  banks  were  permitted 
to  issue  notes  upon  the  security  of  United  States  or  State 
bonds  deposited  with  a  designated  State  official.  Notes 
were  often  based  on  the  depreciated  bonds  of  Southern 
States  which  at  the  outbreak  of  the  Civil  War  became  worth- 
less. Nor  was  there  any  attempt  to  compel  these  banks  to 
maintain  an  adequate  specie  reserve  with  which  to  redeem 


FRONTIER   BANKING  59 

notes  when  presented.  Many  of  them  were  banks  of  circu- 
lation only,  and  were  located  at  out-of-the-way  places.  An 
Iowa  pioneer  described  one  of  these  "wild  cat"  banks  in 
the  following  language : 

I  visited  one  of  those  banks  once.  It  was  in  a  logging  camp  in 
the  thick  woods  near  the  east  shore  of  Lake  Michigan.  It  was  about 
eight  feet  square,  eight  feet  high,  made  of  rough  boards,  flat  roof, 
with  one  small  sliding  window,  a  plain  board  shelf,  on  which  the 
notes  were  signed,  a  small  door,  over  which,  in  red  chalk,  was  the 
name  of  the  bank.  It  was  never  occupied  but  once.  When  I  saw  it, 
the  bank  had  closed.^*^ 

Various  methods  of  evading  redemption  were  practiced  by 
banks  even  where  they  did  not  go  to  the  extreme  described 
by  this  writer  of  putting  notes  in  circulation  at  such  out-of- 
the-way  places  as  to  be  found  only  by  the  ''wild  cats".^^® 

In  1856  two  gentlemen  interested  in  the  great  number  of 
bank  notes  in  circulation,  found  passing  as  money,  in  Iowa 
City,  the  bills  of  more  than  three  hundred  banks,  two-thirds 
of  them  below  par.^*^ 

An  important  part  of  the  banker 's  literature  was  the  bank 
note  reporter.  A  standard  authority  was  Thompson's  Bank- 
Note  Reporter  published  monthly  in  Wall  Street.  The  bank 
note  deposits  could  not  all  be  treated  alike  by  the  banker  of 
that  day :  they  must  be  carefully  assorted  as  they  came  in. 
Major  Sherman  describes  the  labels  on  the  several  compart- 
ments of  an  old  currency  tray  and  the  method  of  handling 
the  various  kinds  of  bank  notes  as  follows : 

To  illustrate  how  the  bank  note  deposits  were  assorted  and  treated 
by  the  bankers  at  that  interesting  period,  I  copy  literally  the  labels 
on  the  several  compartments  in  an  old  currency  tray,  in  which  the 
notes  were  assorted  as  they  came  in,  and  from  which  the  checks 
were  paid.  These  labels  were :  Eastern  Penn.,  N.  Y.  and  New  Eng- 
land, in  one  compartment ;  Ohio,  Indiana  and  Missouri,  in  another ; 
then  Va.,  Md.,  and  Ky. ;  in  another  lU.  and  Wis.,  and  lastly,  West- 
ern Mixed. 


60  HISTORY   OF    BANKING    IN   IOWA 

The  first  named  notes  were  choice  par  funds,  rating  next  to  gold, 
and  they  were  shipped  to  New  York  for  exchange  purposes.  The 
next  two  (0.,  Ind,,  Mo.,  Va.,  Md.  and  Ky.)  were  "bankable  funds", 
so-called,  and  graded  as  among  the  safest  of  bank  notes.  ''Illinois 
and  Wisconsin ' '  took  in  the  few  legitimate  free  banks  in  those  states, 
located  principally  in  Chicago  and  Milwaukee;  but  the  last  label 
was  more  comprehensive  than  all  the  others  put  together.  It  in- 
cluded ' '  rag  tag  and  bob-tail ' ',  everything  not  comprehended  under 
the  other  labels  but  resembling  a  bank  note.  ' '  Western  Mixed ' '  was 
the  dignified  and  formal  name  for  it.  Its  pet  names  were  "stump- 
tail  ",  "  red-horse  ",  "  wild-cat ",  "  brindle-pup ' '  and  many  others  of 
like  endearing  character.  The  vigilant  banker  watched  that  pile  of 
currency  closer  than  the  others.  Its  increase  in  quantity  caused 
much  anxious  concern — and  its  decrease  corresponding  elation. 
.  .  .  That  kind  of  money  reversed  the  usual  order  of  things  in  the 
mind  of  the  banker — a  large  balance,  instead  of  being  a  source  of 
satisfaction,  was  a  very  disagreeable  menace.^*** 

A  similar  condition  is  described  by  W.  H.  M.  Pusey,  a 
pioneer  banker  of  Council  Bluffs.  All  bills  presented  at  the 
bank  were  assorted,  classified,  and  discounted  at  the  current 
rates  on  such  bills.  Sometimes  when  deposits  were  made  by 
a  customer,  so-called  "special  deposits"  were  created.  The 
kind  of  funds  deposited  was  designated  in  the  passbook. 
The  depositor  was  then  repaid  in  the  same  kind  of  funds,  no 
bank  being  willing  to  assume  the  risk  of  sudden  depreciation 
to  which  the  money  of  the  day  was  constantly  subjected.^ ^* 

The  coin  current  in  the  early  days  was  likewise  of  many 
varieties.  Coins  of  foreign  countries  had  formed  a  large 
part  of  the  circulating  medium  in  the  early  history  of  the 
United  States.  Congress  had  enacted  that  the  gold  coins 
of  foreign  countries  should  be  a  legal  tender  in  all  payments 
by  weight.^  ^^  Likewise  certain  foreign  silver  coins  had  been 
made  legal  tender.^  ^^  These  laws  making  foreign  coin  a 
legal  tender  were  not  repealed  until  1857.^^^  The  gold  coins 
current  in  Iowa  included  American  gold  coins,  English 
sovereigns,  French  and  Spanish  gold  coins ;  while  the  silver 


FRONTIER   BANKING  61 

coins  most  prevalent  were  Spanish  milled  dollars  and  quar- 
ters, Mexican  dollars,  and  French  five-franc  pieces.  The 
smaller  coin,  however,  was  not  current  in  the  State:  half- 
cent,  cent,  and  three-cent  pieces  were  seldom  seen — the 
latter  is  described  as  being  '*in  church-plates,  and  at  the 
post-office  ".^^^ 

SUBSTITUTES  FOR  BANK  NOTES 

Scarcity  of  a  circulating  medium  and  the  profit  to  be 
secured  through  note  issue  led  Iowa  bankers  and  other  citi- 
zens or  corporations  to  adopt  various  methods  of  evading 
the  constitutional  provision  against  the  issue  of  such  notes 
— which  added  to  the  general  confusion  of  circulation.  Of 
the  substitutes  for  legitimate  bank  notes,  four  types  are  dis- 
tinguishable— Nebraska-Iowa  bank  notes;  A.  J.  Stevens 
money;  scrip  issued  by  cities,  counties,  or  other  minor  po- 
litical subdivisions;  and  scrip  issued  by  corporations. 

Nebraska-Iowa  Bank  Notes : — The  First  General  Assem- 
bly of  the  Territory  of  Nebraska  convened  at  Omaha,  on 
January  16, 1855.  At  the  first  session  of  the  Assembly  cer- 
tain sections  of  the  Iowa  Code  of  1851  were  adopted  by  the 
new  government.  These  included  those  sections  of  the  crim- 
inal code  which  prohibited  the  issue  of  circulating  notes. 

Of  the  Nebraska  banking  institutions  the  first  to  operate 
in  Iowa  was,  therefore,  started  by  subterfuge :  it  was  known 
as  the  Western  Exchange,  Fire  and  Marine  Insurance  Com- 
pany, and  was  chartered  on  March  16,  1855.  In  addition  to 
its  power  to  write  insurance  it  was  given  power  to  deal  in 
exchange  of  all  kinds,  to  buy  bonds,  mortgages  on  real 
estate,  promissory  notes,  and  to  receive  deposits  and  issue 
certificates  therefor.^  ^^  The  President  was  Thomas  H. 
Benton,  Jr.,  an  original  Iowa  hard-money  man.  Beginning 
operations  early  in  1855,  this  concern  soon  developed  into  a 
general  banking  business.    Until  January,  1856,  there  were 


62  HISTORY    OF   BANKING   IN   IOWA 

more  of  the  notes  of  this  bank  in  circulation  in  Iowa  than  of 
any  other.  Early  in  the  crisis  of  1857  it  went  under  and  its 
notes  became  worthless.^  °^ 

When  the  Second  General  Assembly  of  Nebraska  Terri- 
tory convened,  the  attitude  seems  to  have  changed  and  the 
doors  were  thrown  wide  open  for  banks  of  issue.  Five  spe- 
cial acts  to  charter  banks  were  passed  and  approved  on 
January  18,  1856.  Two  of  these  acts  contain  the  names  of 
well-known  Iowa  bankers  among  the  commissioners  or  in- 
corporators. The  Bank  of  Florence  was  chartered  by  H.  D. 
Downey  of  Iowa  City,  Ebenezer  Cook  of  Davenport,  and 
five  other  men ;  the  Bank  of  Nebraska,  by  Benjamin  F.  Allen 
of  Des  Moines,  Hoyt  Sherman  of  Des  Moines,  and  others.^  ^^ 
It  is  not  easy  to  identify  among  the  incorporators  of  the 
other  banks  the  names  of  Iowa  bankers,  but  the  Bank  of 
Fontanelle  was  soon  under  the  ownership  of  Greene  and 
Weare  of  Cedar  Rapids.^  ^^  Two  other  banks  were  incorpo- 
rated on  the  same  date — the  Platte  Valley  Bank  at  Nebraska 
City  and  the  Nemaha  Valley  Bank  at  Brownsville — ^but  the 
names  of  the  incorporators  do  not  include  the  names  of  any 
well-known  Iowa  bankers.  Since  the  Bank  of  Florence  fur- 
nishes a  good  model  of  the  charter  provisions  and  methods 
of  these  institutions,  a  somewhat  extended  description  of 
this  bank 's  career  is  warranted. 

According  to  the  provisions  of  its  charter,  approved  on 
January  18,  1856,  the  capital  stock  was  $100,000 — ^which 
might  be  increased  at  the  will  of  the  stockholders  to  any 
amount  not  exceeding  $500,000.  The  bank  was  given  the 
right  of  note  issue,  of  dealing  in  exchange,  and  of  engaging 
in  other  regular  and  legitimate  banking  business.  The  pres- 
ident and  cashier  of  the  bank  were  required  to  sign  all  notes. 
Stockholders  were  made  ''each  and  individually  liable  for 
the  full  and  final  redemption  of  such  issue,  payable  at  their 
Banking  House  in  gold  and  silver".  There  was  no  require- 
ment of  specie  reserve ;  neither  was  there  any  security  re- 


FRONTIER    BANKING  63 

quired  for  the  issue ;  nor  any  limit  as  to  amount.  The  bank 
was  required  to  make  an  annual  report  of  its  condition  to 
the  Auditor  of  the  Territory,  and  the  stockholders  were  per- 
sonally liable  for  the  redemption  of  notes.  No  other  pro- 
tection being  afforded  the  public,  possibilities  were  present 
for  the  wildest  of  ''wild  cats",  unless  the  institution  was  in 
the  hands  of  responsible  men.^^® 

When  the  bank  began  operations  the  stock  was  owned  by 
the  banking  houses  of  Cook  and  Sargent  of  Davenport; 
Cook,  Sargent,  and  Downey  of  Iowa  City;  and  Cook,  Sar- 
gent, and  Cook  of  Fort  Des  Moines.  They  stated  in  the 
newspapers  that  they  would  be  personally  responsible  for 
all  its  issues  and  agreed  to  redeem  its  notes  at  its  counter  at 
Florence  in  coin,  and  at  their  respective  banking  houses 
with  exchange  at  current  rates.^^^ 

The  notes  of  the  Bank  of  Florence  were  put  in  circulation 
in  Davenport,  Iowa  City,  and  Des  Moines.  In  the  two  first- 
named  places  they  were  used  to  pay  for  the  erection  of  bank 
buildings;^®"  they  were  maintained  at  par  during  most  of 
their  career  by  the  banking  houses  and  were  finally  all  re- 
deemed.^^^  Doubtless  they  played  a  part  in  stimulating 
business  and  encouraging  speculation.  During  the  summer 
of  1858  they  were  connected  with  a  dramatic  demonstration 
in  Davenport  against  "shinplasters".^^^ 

The  notes  of  the  Bank  of  Nebraska  were  put  in  circulation 
by  B.  F.  Allen  through  his  private  bank  at  Des  Moines,  and 
they  were  current  everywhere  because  of  the  high  credit  of 
Allen.^^3  Indeed,  this  was  the  last  of  the  Iowa-Nebraska 
banks  to  succumb  in  the  panic  of  1857,  its  notes  being  at  par 
as  late  as  April,  1858.  When  the  business  of  the  bank  was 
finally  closed,  '4ts  assets  were  thirteen  sacks  of  flour,  one 
iron  safe,  a  counter,  desk,  stove-drum,  three  arm  chairs,  and 
a  map  of  Douglass  County"  all  of  which  were  returned  as 
sold  by  the  sheriff.  There  is  no  evidence  to  show  that  bill 
holders  lost  money,  for  Allen  was  one  of  the  wealthiest  men 


64  HISTORY    OF    BANKING    IN    IOWA 

in  Iowa  and  was  abundantly  able  to  redeem  all  notes.  In 
1858  he  became  the  heaviest  stockholder  in  the  Des  Moines 
branch  of  the  Iowa  State  Bank. 

The  notes  of  the  Bank  of  Fontanelle  were  floated  from 
banking  houses  in  Cedar  Rapids,  Marion,  Vinton,  Osage, 
Des  Moines,  Council  Bluffs,  Fort  Dodge,  and  Sioux  City. 
Little  record  of  this  bank  is  available,  but  it  did  not  survive 
the  panic  of  1857.i«^ 

The  Third  Legislative  Assembly  of  Nebraska  Territory 
was  more  cautious  than  its  predecessor.  One  of  its  earliest 
acts  was  to  repeal  that  portion  of  the  general  corporation 
law  of  January  25, 1856,  which  authorized  the  incorporation 
of  banks. ^*^^  This  act  had  authorized  incorporation  for  any 
lawful  business  purposes.  No  special  reference  was  made 
to  banks,  nor  were  any  restrictions  placed  upon  their  in- 
corporation.^^^  During  this  third  session,  however,  two 
more  banks  were  incorporated  by  special  charter — the  Bank 
of  De  Soto  and  the  Bank  of  Tekama.^^^  These  institutions 
added  their  quota  to  the  supply  of  bank  notes.  The  maxi- 
mum circulation  of  all  these  Nebraska  banks  was  $420,000 ; 
their  specie  amounted  to  $136,000.^''^  In  1859  the  notes  of 
certain  of  these  banks  were  quoted  in  an  advertisement  of 
Hatch  Brothers  of  Iowa  City  at  the  following  discounts: 
Bank  of  Florence,  par ;  Bank  of  Nebraska,  Bank  of  De  Soto, 
and  Platte  Valley  Bank,  twenty-five  per  cent  discount.*^® 

A.  J.  Stevens  Money: — Other  very  common  currency  in 
Iowa  just  preceding  the  panic  of  1857  were  notes  of  the  Ag- 
ricultural Bank  of  Tennessee.  In  1855  Andrew  J.  Stevens 
of  Des  Moines  became  prominent  in  land  speculation.  He 
induced  James  Callanan  and  S.  R.  Ingham  of  New  York  to 
join  him  in  the  banking  firm  of  A.  J.  Stevens  and  Company. 
They  bought  the  charter  of  the  Agricultural  Bank  of  Ten- 
nessee and  began  to  circulate  its  notes  in  Iowa  by  making 
loans  to  land  buyers.  They  agreed  to  redeem  the  notes  when 


FRONTIER   BANKING  65 

presented,  the  notes  being  stamped  on  their  face  with  the 
firm  name.  The  bank  went  down  early  in  the  crash  of  1857 
and  its  notes  became  worthless.^  ^** 

In  connection  with  this  bank's  affairs  the  courts  estab- 
lished the  principle  that  a  banker  giving  circulation  and 
currency  to  bank  notes  becomes  liable  therefor.  In  a  case 
appealed  to  the  Supreme  Court  of  Iowa  from  the  District 
Court  for  Polk  County,  the  plaintiff,  Mr.  Tarbell,  sued  on 
certain  bills  of  the  Agricultural  Bank  of  Tennessee  amount- 
ing to  $214.  He  alleged  that  Stevens  and  Company  in  the 
course  of  their  business  represented  themselves  to  be  the 
owners  of  and  personally  liable  for  these  bank  notes.  On 
or  about  August  8, 1857,  the  bank  ceased  to  redeem  the  notes 
and  they  became  '^wholly  worthless".  The  court  in  holding 
for  Tarbell  declared : 

Where  a  party  holds  himself  out  to  the  public,  as  liable  for  the  re- 
demption of  the  bills  of  a  bank,  as  a  stockholder,  and  advertises  to  re- 
deem the  same  at  the  counter  of  a  bank  different  from  that  by  which 
the  bills  were  issued,  and  where  by  such  representations  he  gives 
character,  credit,  and  currency  to  the  bills,  and  causes  them  to  be  re- 
ceived in  the  community,  the  promise  or  undertaking,  or  the  liability 
assumed,  is  not  in  the  nature  of  an  assumption  to  pay  the  debt  of  an- 
other, but  is  original  and  independent  in  its  nature,  and  it  is  not 
necessary  to  aver  that  the  promise  or  undertaking  was  in  writing.^^^ 

City,  Township,  cmd  County  Scrip : — A  third  type  of  cir- 
culating medium  which  was  ''made  in  Iowa"  was  the 
''scrip"  of  various  cities,  townships,  and  counties.  This 
was  issued  to  pay  current  expenses  of  the  political  sub- 
division. It  was  printed  in  the  size  and  style  of  bank  notes 
in  denominations  of  one,  two,  three,  five,  and  ten  dollars. 
Samples  of  this  scrip,  in  the  possession  of  the  State  His- 
torical Society  of  Iowa,  issued  by  Iowa  City  bear  date  of 

January  1,  1858.  "Wapello  Scrip"  is  preserved  dating 
from  1857.1^2 


66  HISTORY    OF    BANKING    IN    IOWA 

This  scrip  was  payable  on  demand  to  bearer  and  circu-  • 
lated  freely  for  a  time,  though  not  far  from  home.  A  j&nan- 
cial  statement  of  Iowa  City  in  August,  1859,  included  almost 
$15,000  in  scrip  and  warrants  outstanding.  After  several 
years  of  issue  the  scrip  was  ordered  to  be  collected  and 
destroyed.^ ^^  Other  cities,  townships,  and  counties  issued 
the  same  kind  of  paper  which  circulated  as  money. 

An  unusual  form  of  scrip  which  amounted  practically  to 
an  issue  by  the  banks  and  the  city  in  partnership  was 
adopted  by  the  city  of  Burlington.  The  city  borrowed 
$25,000  in  gold,  which  was  distributed  among  the  three 
banks  of  the  city.  They  held  this  specie  and  paid  six  per 
cent  interest  to  the  city  as  long  as  they  had  the  gold  in  their 
vaults.  Against  this  gold  the  city  issued  orders  which  were 
used  by  the  citizens  as  currency:  Details  of  this  scheme  are 
lacking,  but  a  spirited  debate  over  it  was  indulged  in  at  the 
constitutional  convention  of  1857,  one  delegate  charging 
that  the  city  of  Burlington  had  **  flooded  the  State  with  her 
shin-plasters".  J.  C.  Hall,  delegate  from  Burlington, 
warmly  denied  the  allegation.  He  stated  that  this  currency 
had  always  been  redeemable  in  gold.  If  this  was  the  case 
it  appears  to  have  been  a  form  of  gold  certificate  or  at  least 
on  a  specie  basis.^^^ 

Corporation  Scrip : — Corporations  of  the  State  were  not 
slow  in  following  the  practice  of  the  bankers  and  the  cities 
in  their  contributions  to  the  circulating  medium  of  Iowa. 
One  of  the  most  interesting  examples  of  this  kind  is  the 
Burrows  and  Prettyman  scrip,  issued  by  that  firm  in  Daven- 
port. This  concern  had  a  large  general  store  in  Davenport 
and  a  flouring  mill  at  Rockingham,  which  was  then  the 
county  seat  of  Scott  County.  It  later  extended  its  business 
to  include  the  buying  of  pork  and  produce,  and  the  operation 
of  a  cooper  shop  in  connection  with  a  pork-packing  estab- 
lishment.    During  the  winter,  for  from  three  to  five  months. 


FRONTIER   BANKING  67 

the  river  was  frozen  and  no  shipping  was  possible.  Money 
was  tight  and  media  of  exchange  scarce,  but  the  buyer  of 
farm  products  needed  a  large  amount  of  cash  or  credit  to 
handle  this  business.  During  the  winter  of  1853-1854  Bur- 
rows and  Prettyman  made  a  record  pack  of  19,000  hogs  and 
bought  large  quantities  of  wheat.  The  banks  being  unable 
to  finance  these  operations,  Burrows  and  Prettyman  began 
to  issue  checks  payable  in  the  spring  when  they  should  have 
realized  cash  for  their  products.  This  worked  so  well  that 
in  the  following  year  they  prepared  beautifully  engraved 
notes,  resembling  bank  notes,  and  paid  out  $100,000  of  these 
notes  for  produce.  These  notes  soon  became  an  important 
part  of  the  local  circulation.^ '^^ 

An  excellent  description  of  the  method  of  issuing  the  scrip 
has  been  written  by  Hiram  Price,  later  President  of  the 
State  Bank  of  Iowa  and  one  of  the  most  substantial  finan- 
ciers of  that  time.  He  says :  ' 'I  have  a  very  distinct  recol- 
lection of  seeing  the  chief  member  of  the  firm  carrying  in 
his  hat  (a  large  bell-crown,  such  as  our  Uncle  Samuel  is 
represented  as  wearing)  whole  printed  sheets,  resembling 
bank  bills,  of  what  was  called  the  money  of  the  firm  and  in 
his  vest  pocket  a  pair  of  scissors,  so  that  whenever  and 
wherever  he  was  met  on  the  street  or  other  place  he  was 
prepared  to  pay  in  this  currency  for  wheat  or  pork,  or  any 
other  legal  claim,  by  simply  extracting  from  his  capacious 
hat  a  sheet  of  what  he  called,  and  what  for  the  time  being 
passed,  as  'money',  and  with  his  scissors  cutting  off  the 
necessary  sum  to  liquidate  the  claim!" 

The  writer  continues  by  describing  the  prosperity  of  the 
gentleman  of  the  large  hat.  He  lived  in  a  house  ' '  set  on  a 
hill",  and  his  coach  was  the  envy  of  his  less  prosperous 
neighbors.  But  the  career  of  these  ''wild  cats"  was  ended 
in  the  panic  of  1857  and  they  caused  some  stormy  scenes  in 
Davenport,  as  we  shall  note.  Mr.  Price  in  describing  the 
decline  of  prosperity  built  on  such  an  unsound  basis  draws 


68  HISTORY    OF    BANKING    IN    IOWA 

a  sound  moral  lesson  in  his  concluding  words:  "But  time, 
that  tries  all  the  things  of  earth,  clutched  with  rude  and 
relentless  grasp  this  seemingly  solid  and  beautiful  structure 
of  wealth  and  all  its  surroundings,  and  it  crumbled  and  fell, 
and  then  the  common  people  made  the  discovery  that  all 
that  seems  to  glitter  may  not  be  gold,  and  that  in  the  lan- 
guage of  a  pious  colored  brother,  many  beautiful  and  sub- 
stantial structures  may  be  built  upon  'foundy  sanda- 
tions '."!'« 

Another  example  of  corporation  ''scrip"  with  a  more 
fortunate  career  is  that  of  the  Western  Stage  Company. 
This  company  issued  scrip  to  pay  for  labor,  horses,  horse 
feed,  and  other  current  expenses.  Taken  in  payment  for 
stage  fare,  arrangements  were  made  for  the  redemption  of 
this  scrip  in  current  funds  at  one  of  the  banks  in  Chicago. ^^'^ 
Other  instances  of  corporation  scrip  serving  as  a  medium 
of  exchange  might  be  given.^^^  The  prophecy  of  Wm.  Penn 
Clarke  had  proved  sound;  Iowa  had  a  currency  "well- 
mixed  ' '. 

THE  CEISIS  OF  1857 

In  August,  1857,  a  severe  panic  started  in  New  York  pre- 
cipitated by  the  failure  of  the  Ohio  Life  Insurance  and  Trust 
Company.^  ■^^  The  crisis,  which  spread  rapidly  over  the 
entire  country,  was  especially  severe  in  the  undeveloped 
sections  of  the  West.  Iowa  banks  were  unprepared.  Land 
speculation  was  rampant,  and  in  all  the  newer  sections  of 
the  State  the  credit  of  the  banks  had  been  strained  thereby. 
The  statistics  of  bank  failures  are  not  available,  but  the  fact 
of  liquidation  is  certain.  Eastern  exchange  rose  to  a  pre- 
mium of  ten  or  fifteen  per  cent.  S.  D.  Carpenter,  a  con- 
temporary Cedar  Rapids -banker,  states  that  the  only  bank 
to  survive  in  that  city  was  the  firm  of  Greene  and  Weare. 
The  well-known  firm  of  Cook  and  Sargent  of  Davenport, 
vnth.  branches  in  many  other  points,  suspended  on  December 
16,  1859.is« 


FRONTIER    BANKING  69 

A  feature  of  the  crisis  was  the  attack  upon  the  illegal 
forms  of  currency  in  circulation.  In  Davenport,  notes  of 
the  Bank  of  Florence  and  Burrows  and  Prettyman  checks 
drove  out  the  better  forms  of  currency.  By  January,  1858, 
Florence  notes  were  at  a  discount,  and  by  summer  the  banks 
refused  to  accept  Burrows  and  PrettjTiian  checks.  On  the 
night  of  August  10, 1858,  a  mob  marched  the  streets  bearing- 
banners  marked  ''Down  With  Shinplasters "  and  "We  Want 
Good  Money".  Some  windows  were  broken  and  other  dis- 
turbances started  near  the  bank  of  Cook  and  Sargent  and 
at  the  home  of  Ebenezer  Cook.  A  mass  meeting  was  called 
which  demanded  that  Cook  and  Sargent  redeem  the  Bank 
of  Florence  notes.  Judge  Grant  was  made  arbiter  and 
given  funds  to  redeem  notes.  Notes  in  small  lots  were  first 
redeemed  for  the  laboring  classes,  but  later  all  holders  were 
invited  to  present  them  for  redemption.  On  September  6, 
1858,  the  bank  burned  $200,000  of  redeemed  Bank  of  Flor- 
ence currency.^  ^^ 

The  effects  of  the  liquidations  and  failures  during  the 
panic  and  subsequently  were  to  reduce  the  number  of  banks, 
weed  out  the  weaker  institutions,  and  rid  the  State  of  much 
of  its  poorest  currency.  The  economic  situation  which 
resulted  from  the  crisis  was  most  difficult.  Keal  estate  be- 
came nearly  valueless,  and  thousands  of  farmers,  merchants, 
and  mechanics  were  reduced  from  prosperity  to  poverty  and 
want.^®2 


CONSTITUTIONAL  AUTHORIZATION  OF  BANKING 
CORPORATIONS 

When  the  constitutional  convention  of  1846  finished  its 
work,  the  people  were  not  wholly  satisfied  with  the  results ; 
but  they  accepted  the  Constitution  in  order  to  secure  state- 
hood. Many  who  voted  for  the  adoption  of  the  Constitution 
did  so  with  the  expectation  that  it  would  soon  be  amended. 
Consequently  early  efforts  were  made  to  secure  a  change. 
In  February,  1847,  a  bill  providing  for  an  expression  of  the 
people  upon  the  question  of  revision  passed  the  House  of 
Representatives  and  was  lost  in  the  Senate  only  by  a  vote 
of  ten  to  eight.  During  the  fourth  session  of  the  State 
legislature,  petitions  favorable  to  amendment  were  received 
from  the  people.^  ^^ 

In  the  meantime  Stephen  Hempstead  had  become  Gov- 
ernor, and  in  his  inaugural  address  of  December,  1850,  he 
stated  his  views  on  banking.  He  had  been  an  opponent  of 
banking  in  the  convention  of  1844,  and  his  attitude  re- 
mained unchanged.  The  absence  of  banks  of  issue  in  Iowa 
was  to  his  mind  largely  responsible  for  the  growth  and 
prosperity  of  the  new  State.  He  reiterated  his  opposition 
to  banking  in  later  messages,  expressing  "deep  concern'* 
that  some  of  his  fellow  citizens  were  in  favor  of  amending 
the  Constitution  so  as  to  authorize  banking.  He  pointed  to 
the  experience  of  1840-1841  as  the  best  guide  for  action.  In 
order  to  restrict  the  use  of  currency  and  to  substitute  a  con- 
siderable amount  of  specie,  he  recommended  the  passage  of 
a  law  to  prohibit  circulation  of  all  bank  notes  of  a  smaller 
denomination  than  $10.  When  Governor  Hempstead  re- 
tired from  office  in  1854  the  country  was  in  the  midst  of  a 

70 


AUTHORIZATION  OF  BANKING  71 

monetary  crisis,  which  he  attributed  to  the  effects  of  paper 
money,  and  he  pointed  out  the  fact  that  the  worst  sufferers 
were  the  laborers.  Once  more  he  cautioned  the  people  of 
Iowa  not  to  amend  the  Constitution  to  authorize  banking.^ ^^ 

On  the  other  hand,  James  W.  Grimes  who  became  Gov- 
ernor in  1854  was  in  favor  of  revision.  The  legislature 
submitted  the  issue  to  the  people,  and  at  the  general  election 
of  1856  the  voters  authorized  a  constitutional  convention.^  ^^ 
On  January  19,  1857,  the  convention  convened  at  Iowa  City 
to  draft  what  has  been  for  over  sixty  years  the  fundamental 
law  of  Iowa.  Of  the  thirty-six  delegates,  twenty-one  were 
Kepublicans  and  fifteen  were  Democrats.^  *^  The  popular 
demand  for  a  new  Constitution  was  based  largely  on  a  desire 
to  change  the  article  on  incorporation,  and,  more  particu- 
larly, to  remove  the  restrictions  which  prevented  the  legisla- 
ture from  providing  banking  facilities.^ ^'^  Evidently  the 
people  had  come  to  feel  that  the  prohibition  of  banking  cor- 
porations was  not  the  most  satisfactory  solution  of  the  prob- 
lem. 

The  Committee  on  Incorporations  made  its  report  to  the 
convention  on  January  30, 1857.  This  report  contained  sec- 
tions authorizing  the  General  Assembly  to  pass  a  general 
banking  law  and  also  to  charter  a  State  bank  with  branches. 
Judging  by  the  provisions  included  in  its  report,  the  com- 
mittee was  unwilling  to  trust  the  judgment  of  members  of 
the  legislature.  Detailed  restrictions  were  to  be  placed  in 
the  Constitution  concerning  the  powers  which  could  be 
granted  to  banking  institutions  created  by  the  General  As- 
sembly.^ ^^ 

In  the  debate  on  the  question  of  limiting  the  laws  which 
might  be  enacted  by  the  legislature,  some  interesting  opin- 
ions were  expressed.  One  member  stated  that  his  constitu- 
ents were  in  favor  of  some  such  provision  because  they  had 
been  told  banking  was  a  scheme  by  which  men  were  going 
to  combine  and  deceive  the  people  and  ' '  that  bankers  would 


72  HISTORY    OF    BANKING    IN    IOWA 

invariably  steal".  He  was,  therefore,  in  favor  of  constitu- 
tional provisions  requiring  the  legislature  to  provide  that 
if  the  bankers  stole  they  would  be  punished.  Another  mem- 
ber suggested  that  the  same  provision  be  made  to  apply  to 
farmers.  Still  another  thought  that  the  contemplated  re- 
strictions on  legislative  action  were  so  great  that  the  con- 
vention might  as  well  add  the  penal  code  of  Iowa  to  the 
article.  Certain  members  were  emphatic  in  denying  that 
every  man  who  has  a  dollar  to  invest  in  a  banking  institu- 
tion is  a  scoundrel  and  thief. ^^^ 

It  appears  obvious  now,  as  was  frequently  charged  by 
members  of  the  convention,  that  the  framers  of  the  Consti- 
tution were  exercising  functions  which  properly  belonged 
to  the  legislature.  This  extreme  precaution  on  their  part 
was  especially  unnecessary  in  view  of  the  fact  that  it  was 
also  proposed  that  the  Constitution  should  prescribe  that 
no  banking  law  should  take  effect  until  approved  by  a  ma- 
jority of  the  voters  at  a  general  or  special  election.^^*^ 

It  seemed  clear  to  a  majority  of  the  members  of  the  con- 
vention that  some  change  must  be  made  in  the  banking  law. 
The  first  problem  was  whether  to  provide  for  a  State  bank 
with  branches,  or  for  a  system  of  general  banking  with  note 
issue  secured  by  the  deposit  of  State  stocks  with  bank 
commissioners.  Some  of  the  arguments  advanced  by  advo- 
cates of  the  State  bank  system  were :  first,  experience,  espe- 
cially in  Ohio  and  Indiana,  had  proved  the  superiority  of 
that  system;  second,  such  a  system  inspired  confidence  be- 
cause of  the  mutual  responsibility  of  all  branches ;  third,  it 
could  be  used  as  a  depository  of  State  funds;  fourth,  it 
would  lower  the  interest  rate  so  that  instead  of  the  two  or 
three  per  cent  per  month,  then  being  paid,  it  would  enable 
borrowers  to  secure  funds  at  ten  per  cent  per  annum ;  and 
fifth,  paper  of  a  State  bank  system  would  be  current  abroad, 
while  notes  under  a  general  banking  system  would  never 
circulate  far  from  home  at  par. 


AUTHORIZATION  OF  BANKING  73 

The  principal  opponents  of  the  State  bank  system  at- 
tacked it  on  the  grounds  of  its  monopolistic  tendency.  Under 
a  general  banking  system  it  was  pointed  out  that  anyone 
could  engage  in  banking  under  proper  restrictions.  It  was 
contended  that  in  order  to  protect  themselves  against  un- 
sound branches,  the  branches  of  the  State  bank  already  in 
the  system  must  have  the  right  to  pass  on  the  application 
of  a  new  branch.  If  any  applying  branch  was  allowed  to 
force  itself  in,  there  would  be  unfair  liability  resting  on  the 
sound  banks.  On  the  other  hand,  this  very  protection  might 
be  the  instrument  of  dangerous  monopoly.  Considerable 
objection  was  raised  to  the  name  ^' State  Bank  of  Iowa" 
since  it  would  appear  to  the  public  that  the  State  was  an 
owner  of  stock  in  the  bank  or  at  least  was  responsible  for 
its  notes.  It  was  pointed  out  that  the  State  of  Indiana  had 
an  interest  in  the  State  bank  there ;  but  such  a  situation  was 
not  only  not  contemplated  in  Iowa,  but  was  actually  pro- 
hibited by  another  section  of  the  Article  on  Incorpora- 
tions.i^^ 

The  subject  was  warmly  debated  in  Committee  of  the 
Whole  for  nearly  a  week  and  numerous  amendments  were 
adopted.  Finally  the  report  as  amended  was  referred  to  a 
select  committee  of  five.^^^  When  this  committee  brought  in 
its  report  on  February  23rd,  all  restrictions  upon  the  legis- 
lature regarding  the  details  of  banking  legislation  had  been 
removed.  A  minority  report  in  favor  of  retaining  the  re- 
strictions was  rejected  by  the  convention,  and  the  report  as 
amended  previous  to  its  reference  to  the  select  committee 
was  then  taken  up.  This  was  considered  on  the  following 
day  and  the  select  committee's  report  was  again  taken 
under  consideration.  Point  by  point  the  sections  were  added 
and  amended  until  the  report  was  again  filled  with  restric- 
tions upon  the  legislature.^®^ 

Only  a  few  members  were  openly  opposed  to  any  altera- 
tion of  the  Constitution  with  reference  to  the  subject  of 


74  HISTORY    OF    BANKING    IN    IOWA 

banking.  The  sentiments  of  J.  H.  Emerson,  an  anti-bank 
man,  seem  to  represent  fairly  well  the  opinions  of  the  group 
which  distrusted  the  legislature.  He  reminded  the  conven- 
tion that  it  was  the  legislatures  of  other  States  that  had 
created  the  **wild  cats"  and  *' red-dogs"  that  were  in  ex- 
istence.^^"* The  only  test  of  radical  anti-bank  sentiment 
came  when  Daniel  H.  Solomon  moved  to  strike  out  the 
fourth  and  subsequent  sections  of  the  report  and  insert  in 
lieu  thereof  these  words :  "The  power  to  issue  paper  money 
shall  not  be  granted  by  this  State".  This  motion  was  de- 
feated by  a  vote  of  four  to  thirty-one.  After  this  the  report 
of  the  select  committee,  with  its  amendments,  was  adopted 
with  only  five  dissenting  votes.^^^  Article  VIII  of  the  Con- 
stitution, as  finally  approved  by  the  convention,  contains  the 
banking  provisions.  Subject  to  the  restriction  that  any 
banking  legislation  enacted  by  the  General  Assembly  must 
be  submitted  to  the  electors,  the  way  was  opened  for  a  State 
bank  with  branches  and  a  free  banking  law.^^® 

GENEEAL  OE  FEEE  BANKING  LAW  OF  1858 

In  his  second  biennial  message  of  January  12,  1858,  Gov- 
ernor James  W.  Grimes  called  the  attention  of  the  General 
Assembly  to  the  fact  that  the  Constitution  authorized  the 
establishment  of  a  State  bank  and  the  enactment  of  a  free 
banking  law  under  certain  restrictions.  He  urged  the  pas- 
sage of  laws  for  these  purposes,  but  cautioned  the  General 
Assembly  "that  banks  are  to  be  established  to  secure  the 
public  ivelfare  and  not  to  promote  the  purposes  of  stock- 
holders and  capitalists  ".^^"^ 

The  General  Assembly  immediately  proceeded  to  enact 
into  law  what  was  clearly  the  popular  will  in  this  matter. 
On  February  6, 1858,  the  Committee  on  Banks  and  Banking 
of  the  House  of  Eepresentatives  reported  that  the  commit- 
tee had  acted  with  the  Senate  committee.  In  order  to  ex- 
pedite business  it  had  been  agreed  that  two  bills  were  to 


AUTHORIZATION  OF  BANKING  75 

be  introduced  simultaneously,  a  Free  Banking  Bill  in  the 
House  and  a  State  Bank  Bill  in  the  Senate.  After  careful 
consideration  by  the  House  in  Committee  of  the  Whole,  the 
Free  Banking  Bill  was  reported  back  to  the  House  with 
numerous  amendments,  most  of  which  were  of  minor  im- 
portance. When  finally  revised,  the  bill  passed  the  House 
by  a  vote  of  forty  to  twenty-five.^  ^^  In  the  Senate,  after 
considerable  amendment,  the  bill  passed  by  a  vote  of  twenty- 
three  to  five.^^^  Differences  between  the  houses  were  ad- 
justed in  conference  and  the  measure  received  the  executive 
approval  on  March  22,  1858.  According  to  the  Constitu- 
tion, and  as  provided  in  the  statute,  the  act  was  submitted 
to  a  vote  of  the  people  at  a  -special  election  held  on  June 
28th.  At  this  election  the  law  was  endorsed  by  a  large 
majority,  30,419  votes  being  cast  in  favor  of  the  measure 
and  10,447  against  it.  Thereupon  Governor  E.  P.  Lowe 
proclaimed  the  act  as  law  on  July  29,  1858.^'^'^  This  law 
remained  in  force  until  March  16,  1870,  but  no  banks  were 
established^*'^  under  its  provisions.  Its  chief  interest  lies 
in  showing  the  sentiment  regarding  banking,  and  the  type 
of  regulations  regarded  as  essential  to  safeguard  the  ''pub- 
lic welfare". 

Under  the  provisions  of  the  act,  any  number  of  persons 
might  be  incorporated  to  establish  banks  of  discount,  de- 
posit, and  circulation.  The  minimum  capital  was  fixed  at 
$50,000,  all  of  which  must  be  fully  paid  in  cash.  Subsequent 
withdrawal  of  any  portion  of  this  capital  was  strictly  pro- 
hibited. No  bank  could  be  located  in  a  town  of  less  than 
five  hundred  inhabitants,  and  the  oflSce  where  the  business 
was  transacted  must  be  in  the  city  or  town  where  the  cor- 
poration was  located.  Banks  so  organized  would  be  per- 
mitted to  do  a  general  banking  business.^^^ 

Stockholders  were  made  liable  to  the  creditors  to  an 
amount  equal  to  the  shares  held,  over  and  above  the  stock 
itself;  that  is,  they  were  subject  to  double  liability.-^'     A 


76  HISTORY    OF    BANKING    IN    IOWA 

strong  attempt  to  make  stockholders  liable  without  limit  as 
to  amount  failed  in  the  House.^*'^  Shares  of  stock  were 
made  transferable  on  the  books  of  the  corporation,  but  the 
transfer  of  stock  would  not  affect  the  responsibility  of  stock- 
holders for  liabilities  accruing  while  they  remained  stock- 
holders. Semi-annual  statements  must  include  the  names 
of  stockholders,  places  of  residence,  amount  of  stock  held, 
and  all  transfers  of  stock.  A  copy  of  this  statement  was  to 
be  conspicuously  posted  in  the  bank  for  public  inspection 
and  another  copy  filed  with  the  county  recorder — the  latter 
statement  being  prima  facie  evidence  in  the  courts  of  the 
facts  contained  therein.  Clearly  the  obligation  of  share- 
holders would  not  be  lightly  assumed  under  these  condi- 
tions.^^^ 

While  the  banks  were  permitted  to  do  a  general  banking 
business,  their  activities  were  limited  in  certain  respects. 
Loans  must  be  made  on  personal  security  only  and  could 
have  only  four  months  to  run  to  maturity.  Interest  and 
discount  was  limited  to  ten  per  cent  until  January  1,  1863, 
after  which  it  was  to  be  not  over  eight  per  cent.  Usury  was 
to  be  punished  by  forfeiture  of  the  debt.  The  banks  were 
forbidden  to  pay  interest  on  current  deposits.  Reserve 
against  deposits  of  twenty-five  per  cent  was  required  to  be 
kept  at  all  times.  The  banks  were  prohibited  from  pur- 
chasing or  holding  real  estate,  except  that  which  was  needed 
for  the  banking  house  and  that  obtained  at  sales  under  judg- 
ment to  secure  debts.^^^ 

In  its  provisions  regarding  note  issue,  the  law  was  most 
specific  and  exacting.  Experience  with  notes  of  free  banks 
of  other  States  led  the  framers  to  use  great  caution  in  this 
respect.  Certain  constitutional  limitations  had  also  to  be 
complied  with :  the  security  required,  the  countersigning  by 
a  State  officer,  publicity  of  shareholders,  prohibition  of  sus- 
pension of  specie  payments,  making  bill  holders  preferred 
creditors,  and  double  liability  of  stockholders  were  impor- 


AUTHORIZATION  OF  BANKING  77 

tant  requirements  of  the  Constitution  for  the  protection  of 
note  holders.  The  State  Auditor  was  designated  by  the  act 
to  have  charge  of  note  issue.  Notes  of  circulation  were  to 
be  numbered,  registered,  and  countersigned  by  a  register 
appointed  for  such  purpose  by  the  State  Auditor.  Banks 
might  procure  their  own  plates  and  dies  for  engraving  or 
secure  the  notes  from  the  Auditor.  In  either  case  the  bank 
was  required  to  reimburse  the  Auditor  for  the  costs.  After 
having  signed  the  circulating  notes  a  bank  could  put  them 
in  circulation  in  the  ordinary  course  of  business.  Notes 
were  made  payable  on  demand  at  the  banking  house  of  the 
corporation.  Circulation  of  foreign  notes  of  non-specie 
banks  was  prohibited. 

The  notes  were  to  be  secured  by  the  deposit  of  public 
stocks.  Eligible  stocks  consisted  of  United  States  or  State 
stocks  upon  which  full  interest  was  annually  paid;  and  in 
the  case  of  State  bonds  the  interest  rate  must  not  be  less 
than  six  per  cent.  The  value  of  the  stocks  as  security  was 
to  be  rated  at  ten  per  cent  below  their  average  market  value 
in  New  York,  for  the  thirty  days  next  preceding  their  de- 
posit with  the  Auditor.  In  case  the  stocks  so  held  depre- 
ciated, the  bank  was  required  to  make  them  good.  Upon 
the  stocks  so  rated  in  value  the  Auditor  issued  notes  to  an 
amount  ten  per  cent  less  than  the  market  value  of  the  secur- 
ities. The  aggregate  amount  of  notes  issued  was  limited 
only  by  the  stocks  so  deposited.-^ ^ 

As  long  as  it  redeemed  its  circulation  and  continued  its 
affairs  in  a  normal  manner,  the  bank  was  to  receive  the 
interest  on  the  bonds  deposited.  If  the  bank  wished  to  close 
its  affairs,  the  Auditor  was  authorized  to  exchange  stocks 
(bonds)  for  circulating  notes.  These  bank  notes  were  then 
to  be  cancelled  and  destroyed.  No  redemption  fund  was 
supplied  to  the  Auditor,  but  if  any  bank  suspended  specie 
payments  on  its  notes  the  Auditor  was  authorized  imme- 
diately to  sell  the  stocks  at  public  auction  in  New  York  and 


78  HISTORY    OF    BANKING    IN    IOWA 

pay  the  bill  holders.  The  State  did  not,  however,  guarantee 
the  ultimate  payment  of  all  notes  beyond  the  proper  ap- 
plication of  the  securities  pledged  to  the  Auditor  for  their 
redemption.  In  case  a  bank  failed,  and  refusal  to  redeem 
notes  in  specie  constituted  an  act  of  insolvency,  the  notes 
were  preferred  to  all  other  liabilities,  the  receiver  being 
directed  to  apply  the  assets,  first,  to  the  redemption  or  pay- 
ment of  circulating  notes;  second,  to  the  payment  of  de- 
posits ;  third,  to  the  payment  of  all  other  indebtedness ;  and, 
fourth,  to  the  payment  of  stockholders.  With  this  prefer- 
ence, and  fortified  by  double  liability  of  stockholders,  little 
possibility  of  loss  by  note  holders  existed.^"^ 

Whenever  any  corporation  desiring  to  relinquish  the 
banking  business  redeemed  ninety  per  cent  of  its  notes,  it 
could  deposit  with  the  Auditor  a  sum  equal  to  the  notes 
then  outstanding  and  receive  all  of  its  securities  deposited 
with  the  Auditor.  Thereafter,  the  Auditor  could  pay  out 
the  money  solely  for  the  redemption  of  notes.  The  bank 
could  give  notice  for  two  years  of  final  redemption  of  notes 
by  proper  publication.  At  the  end  of  that  time,  if  the  notice 
had  been  properly  given,  the  Auditor  was  authorized  to 
return  to  the  corporation  all  money  and  securities.^"^  Notes 
lost  or  destroyed  would  be  a  clear  gain  to  the  bank.  An  at- 
tempt during  the  passage  of  the  act  to  give  the  right  to  a 
note  holder  to  recover  for  notes  that  he  could  prove  were 
"irrevocably  destroyed",  was  defeated.^^"  In  the  national 
system  this  profit  on  unredeemed  notes  goes  to  the  United 
States  government. 

The  proportion  of  small  notes  was  limited  by  the  act. 
Thus,  no  notes  less  than  $1  were  permitted.  Not  more  than 
ten  per  cent  of  the  amount  could  be  in  notes  of  $2  each,  not 
more  than  twenty-five  per  cent  could,  be  in  notes  of  all 
denominations  under  $5,  and  not  more  than  fifty  per  cent  in 
notes  of  all  denominations  under  $10.  The  prejudice  against 
small  notes  had  led  to  a  fight,  during  the  passage  of  the  law, 


AUTHORIZATION  OF  BANKING  79 

for  a  more  rigid  limitation.  An  amendment  was  defeated 
which  would  have  made  the  minimum  note  $10.^^^ 

The  act  named  Thomas  Hedge,  George  L.  Davenport,  P. 
Gad.  Bryan,  Thomas  A.  Graham,  and  E.  G.  Potter  as  bank 
commissioners  to  hold  office  until  their  successors  were 
elected  and  qualified.  Thereafter  at  each  regular  biennial 
session  of  the  General  Assembly  three  bank  commissioners 
were  to  be  elected.  The  seeming  inconsistency  of  appoint- 
ing five  commissioners  and  thereafter  electing  only  three 
can  be  explained  only  by  the  fact  that  the  House  bill  named 
the  commissioners  and  provided  for  five  men  thereafter. 
The  Senate  reduced  the  permanent  board  to  three,  but  left 
the  other  section  without  amendment.  No  stockholder,  di- 
rector, or  employee  in  any  bank  established  by  the  act  was 
eligible  for  election  as  commissioner.  Compensation  for  the 
commissioners  was  on  a  fee  basis  at  the  rate  of  $5  per  day 
spent  in  making  examinations  of  banks.  These  fees  were  to 
be  paid  by  the  banks  in  proportion  to  their  capital  stock. 

The  most  important  duty  of  the  commissioners  was  to 
make  semi-annual,  or  if  they  deemed  it  advisable,  more 
frequent  examinations  of  the  condition  of  the  banks.  They 
were  given  ample  power  to  examine  the  books,  documents, 
officers,  and  agents  of  the  bank.  Reports  of  condition 
were  to  be  published.  In  addition  to  these  public  reports 
the  banks  were  required  to  make  quarterly  statements  of 
their  condition  to  the  Auditor.  These  statements  were  to 
contain  the  amount  of  capital  stock,  the  real  estate  held,  the 
bills  receivable,  the  bills  payable,  deposits  with  other  banks, 
the  amount  of  circulation,  the  loans  and  discounts,  specie  on 
hand,  notes  of  other  banks,  loans  to  directors  and  stock- 
holders, suspended  debts,  and  reserve  against  deposits  on 
hand.2^2 

The  statute  is  long  and  detailed,  and  only  its  more  essen- 
tial features  have  been  outlined  here.  As  one  is  accustomed 
to  look  upon  banks,  the  minimum  capital  requirement  of 


80  HISTORY    OF    BANKING    IN    IOWA 

$50,000  seems  to  have  been  rather  high  to  meet  the  needs  of 
a  pioneer  community.  Savings  banks  in  Iowa  to-day  may 
incorporate  with  a  capital  of  $10,000.  But  it  must  be  re- 
membered that  this  legislation  was  framed  to  govern  banks 
of  issue.  In  order  to  control  circulation  under  a  decentral- 
ized system  such  as  this,  the  number  and  size  of  the  institu- 
tions must  be  restricted.  No  provision  was  made  at  all  for 
banks  of  discount  and  deposit  not  desiring  the  right  of  issue. 
This  shows  that  the  issue  function  was  still  regarded  as  the 
only  one  which  needed  public  regulation ;  banking  and  note 
issue  were  still  regarded  as  essentially  the  same  thing.  In 
regard  to  the  safety  of  notes  the  act  seems  open  to  no  criti- 
cism. The  provision  requiring  the  deposit  of  public  stocks 
as  security  for  notes  was  substantially  the  same  as  that  of 
the  free  banking  laws  of  other  States ;  the  same  general  plan 
was  incorporated  into  the  national  banking  system.  In- 
stead of  throwing  wide  open  the  opportunity  for  big  profits 
to  bankers  at  the  expense  of  the  note  holders,  the  framers 
of  this  act  used  every  precaution  to  provide  a  sound  circula- 
tion. 

The  fact  that  no  banks  were  incorporated  under  the  law 
is  evidence  that  it  did  not  oifer  easy  opportunity  to  the 
''wild  cat"  banker  or  speculator.  Nevertheless,  the  opposi- 
tion to  banks  was  not  entirely  dead.  The  votes  in  both 
branches  of  the  legislature  registered  a  considerable  pro- 
test. A  better  test  of  the  extreme  prejudice  was  obtained 
in  the  House  immediately  after  the  passage  of  the  act.  A 
motion  to  amend  the  title  to  strike  out  the  word  "banking" 
and  insert  in  lieu  thereof  the  word  "swindling"  so  as  to 
read  an  act  authorizing  general  swindling  in  the  State  of 
Iowa  was  supported  by  fourteen  members. -^^ 

By  the  capitalists  of  this  and  other  States  the  measure 
was  regarded  as  too  stringent;  consequently  early  agitation 
was  made  to  modify  its  provisions,  but  Governor  Lowe  and 
his  successor,  Governor  Kirkwood,  were  both  opposed  to 


AUTHORIZATION  OF  BANKING  81 

modification.  In  his  biennial  message  to  the  legislature  in 
January,  1860,  Governor  Lowe  said:  '*!  have  not  under- 
stood that  any  banks  have  been  established  under  the  Free 
Banking  Law.  I  have  heard  it  suggested  that  it  was  too 
stringent  and  ought  to  be  modified.  I  doubt  whether  an 
application  of  this  kind  ought  to  be  entertained,  should  one 
be  made.  It  is  the  want  of  these  stringent  provisions  in  the 
Free  Banking  systems  of  Illinois  and  Wisconsin  that  have 
flooded  those  States  and  Iowa  with  their  irredeemable  paper. 
It  is  infinitely  better  for  the  people  of  this  State  to  have  no 
free  or  State  banks,  if  their  paper  cannot  be  redeemed  on 
demand  in  specie.  "^^* 

In  spite  of  the  wishes  of  the  executive,  the  General  As- 
sembly proceeded  to  amend  the  act.  The  amendment  would 
have  changed  the  then  existing  law  in  three  particulars: 
first,  by  permitting  banks  to  be  organized  with  a  capital  of 
$25,000  instead  of  $50,000;  second,  by  abolishing  the  office 
of  bank  commissioners  and  thus  doing  away  with  super- 
vision and  examination ;  and,  third,  by  permitting  the  estab- 
lishment of  banks  in  towns  of  250  population  instead  of  500 
as  before  provided.  Governor  Kirkwood  was  opposed  to 
the  second  and  third  changes  suggested  and  upon  those 
grounds  vetoed  the  bill. 

In  his  veto  message  he  elaborated  upon  his  reasons  for 
opposing  the  changes.  He  regarded  careful  and  disinter- 
ested supervision  coupled  with  thorough  and  searching  ex- 
amination as  necessary  to  protect  the  public  interest.  The 
object  of  the  limitation  of  banks  to  towns  of  at  least  five 
hundred  population,  he  stated,  was  to  prevent  the  establish- 
ment of  banks  at  remote  and  inaccessible  places — a  favorite 
trick  of  the  ''wild  cat"  banker.  Banks  of  issue  were  only 
to  be  tolerated  when  their  notes  could  be  promptly  converted 
into  specie.  Placing  them  at  inaccessible  points  would 
make  the  notes  practically  irredeemable.  He  felt  also  that 
such  small  places  would  not  support  a  legitimate  banking 


82  HISTORY    OF    BANKING    IN   IOWA 

business,  and  banks  established  there  must  necessarily  be 
unsafe.  He  denounced  the  evils  of  the  irredeemable  paper 
of  Illinois  and  Wisconsin,  and  warned  against  adding  to  the 
evil  by  permitting  similar  conditions  in  Iowa.  Neither  was 
he  willing  to  shirk  his  responsibility  by  allowing  the  bill  to 
go  to  the  people  for  approval  or  rejection. 

Governor  Kirkwood  had  been  a  member  of  the  Senate  in 
1858  when  the  law  was  passed  and  knew  the  reasons  for  its 
stringency.  To  be  sure  he  was  also  a  heavy  stockholder  in 
the  Iowa  City  branch  of  the  State  Bank  of  Iowa,  but  there 
is  no  evidence  that  he  was  improperly  influenced  on  this 
account.  Indeed,  the  State  Bank  would  not  have  suffered 
from  competition  with  free  banks.  The  Governor's  reason- 
ing was  sound  and  his  motives  were  of  the  highest.  An 
attempt  to  pass  the  bill  over  his  veto  failed  in  the  Senate  by 
a  vote  of  fifteen  to  sixteen,  thus  falling  far  short  of  the  con- 
stitutional majority.^^'' 

The  free  banking  law  of  Iowa  was  rendered  obsolete  by 
the  amendment  to  the  national  banking  act  on  March  3, 1865, 
which  taxed  out  of  existence  the  notes  of  State  banks.  No 
banks  had  been  established  under  its  provisions ;  and  it  was 
finally  repealed  on  March  16,  1870.216 


VI 

THE  STATE  BANK  OF  IOWA 

The  sections  relating  to  banking  in  the  Constitution  of 
1857  authorized  the  State  legislature  to  enact  a  general 
banking  law  and  also  to  provide  for  a  State  bank  with 
branches.  As  has  been  shown  in  the  previous  chapter,  a 
free  banking  law  was  duly  enacted  but  no  banks  were  estab- 
lished under  its  provisions,  A  State  Bank,  on  the  other 
hand,  was  promptly  created  and  continued  in  successful 
operation  until  absorbed  by  the  national  banking  system. 

In  the  creation  of  a  State  bank,  Iowa  was  guided  by  the 
experience  of  other  States.  Many  of  the  neighboring  Com- 
monwealths had  tried  out  the  State  bank  system  in  some 
form.  The  State  Bank  of  Indiana  was  chartered  in  1817 ; 
in  1818  the  Constitution  of  Illinois  prohibited  all  other 
forms  of  banking  except  a  State  bank  with  branches ;  Ohio 
had  established  her  State  bank  in  1845 ;  and  Michigan,  Mis- 
souri, Arkansas,  and  other  States  had  already  experimented 
with  this  plan  of  banking.  In  many  cases  the  States  owned 
stock  in  the  bank,  but  State  ownership  was  not  essential  in 
order  to  constitute  a  *' State  Bank".  In  fact  States  often 
owned  stock  in  the  banks  of  the  State  where  there  was  no 
attempt  at  centralization.  On  the  other  hand,  some  *  ^  State 
Banks"  existed  in  which  the  State  held  no  stock.  In  Illi- 
nois the  State  was  the  sole  owner  of  the  stock  of  the  State 
Bank  of  Illinois ;  in  Indiana  the  State  was  a  large  minority 
stockholder ;  in  the  case  of  the  State  Bank  of  Ohio  none  of 
the  stock  was  State  owned.^^^ 

Experience  in  other  States  with  State  ownership  of  bank 
stock  had  proved  so  generally  unsatisfactory  that  the  con- 
stitution makers  in  Iowa  specifically  prohibited  political  or 

83 


84  HISTORY    OF    BANKING    IN    IOWA 

municipal  corporations  from  becoming  stockholders,  di- 
rectly or  indirectly,  in  any  banking  corporation.  Private 
ownership  was  therefore  a  basic  principle  upon  which  the 
State  Bank  of  Iowa  was  created.  The  Constitution  imposed 
the  further  restrictions  that  the  bank  must  be  founded  on 
an  actual  specie  basis  and  that  the  branches  thereof  must 
be  made  mutually  responsible  for  all  notes  issued  to  circu- 
late as  money.^^* 

The  bill  to  incorporate  the  State  Bank  of  Iowa  was  intro- 
duced in  the  Senate  at  the  same  time  that  the  free  banking 
law  was  placed  before  the  House  of  Representatives.  As 
reported  by  the  committee,  the  bill  was  before  the  Senate 
for  about  four  weeks.  During  this  time  it  occupied  the 
foremost  place  on  the  calendar.  Each  section  was  dis- 
cussed, and  sometimes  amended,  before  the  bill  was  finally 
passed.  Its  passage  by  the  Senate  was  by  a  majority  of 
twenty-eight  to  four  and  by  the  House,  after  slight  amend- 
ment, by  a  vote  of  forty-five  to  eighteen.^^^  The  Constitu- 
tion required  that  this  act,  after  passage  by  the  General 
Assembly  and  approval  by  the  Governor,  must  be  submitted 
to  the  voters  for  their  endorsement.  A  special  election  was 
ordered  for  June  28, 1858,  at  which  time  the  act  was  carried 
by  an  overwhelming  majority,  the  vote  being  41,568  for  and 
3697  against.  On  the  29th  of  July,  Governor  Lowe  pro- 
claimed the  act  in  force.^^*^ 

PEOVISIONS   OF   THE   CHARTEE 

The  statute  created  a  board  of  ten  commissioners  to  or- 
ganize the  system  and  carry  into  effect  the  provisions  of 
the  act.  The  men  named  were  designated  as  the  Board  of 
Bank  Commissioners.  C.  H.  Booth  of  Dubuque  County, 
E.  H.  Harrison  of  Lee  County,  Ezekiel  Clark  of  Johnson 
County,  J.  W.  Duton  of  Muscatine  County,  William  J.  Gat- 
ling  of  Polk  County,  C.  W.  Slagle  of  Jefferson  County,  Elihu 
Baker  of  Linn  County,  William  S.  Dart  of  Mahaska  County, 


THE  STATE  BANK  OF  IOWx\  85 

L.  W.  Babbitt  of  Pottawattamie  County,  and  Edward  T. 
Edgington  of  Lucas  County  were  named  by  the  act  to  serve 
as  commissioners.^^^ 

It  was  provided  that  the  commissioners  should  meet 
within  thirty  days  from  the  passage  of  the  act  to  examine 
certificates  of  branches.  This  was  to  be  followed  by  a  per- 
sonal examination  of  the  condition  of  the  branch,  especially 
with  respect  to  the  money  paid  in  on  account  of  the  capital 
stock  and  with  respect  to  the  responsibility  and  integrity 
of  stockholders  and  directors.  Whenever  they  were  satis- 
fied that  at  least  five  branches  had  met  the  requirements  of 
the  act,  they  were  to  certify  the  same  to  the  Governor  and 
notify  the  branches  of  the  fact.  Each  branch  must  then 
choose  a  director  and  these,  together  with  three  directors 
named  in  the  statute  to  represent  the  State,  should  there- 
after control  the  destiny  of  the  State  Bank  of  Iowa.  Upon 
proclamation  of  the  Governor  that  the  law  had  been  in  all 
respects  complied  with,  the  several  branches  were  author- 
ized to  commence  business.^^^ 

Thus  the  State  Bank  of  Iowa  was  not  a  single  institution 
but  rather  the  federation  of  a  group  of  institutions,  each 
having  its  own  capital,  stockholders,  directors,  and  corpor- 
ate charter.  The  parent  bank  was  incorporated  by  the  act 
and  as  such  had  legal  power  to  make  contracts,  to  sue  or  to 
be  sued  in  court,  and  to  exercise  the  usual  powers  of  a  cor- 
poration. But  it  had  no  capital  stock  apart  from  that  of  its 
branches,  nor  was  it  to  transact  any  banking  business  except 
with  the  branches.  The  head  office  was  maintained  at  Iowa 
City,  but  there  was  organized  also  at  Iowa  City  a  branch  of 
the  State  Bank.  This  branch  sustained  exactly  the  same 
relations  to  the  State  Bank  as  did  any  of  the  other  branches. 
This  plan  of  organization  was  found  also  in  the  State  banks 
of  Indiana^^^  and  of  Ohio,^-*  which  were  the  models  for  the 
Iowa  bank.  Of  Iowa's  political  leaders,  many  received  their 
early  impressions  in  Ohio.    Governor  Lucas,  the  first  Terri- 


86  HISTORY   OF    BANKING    IN   IOWA 

torial  Governor  of  Iowa,  had,  as  Governor  of  Ohio,  strongly- 
supported  a  State  bank  in  his  native  State.^^^  Governor 
Lowe,  in  office  when  the  Iowa  law  was  passed,  was  born  and 
educated  in  Ohio.^^^  The  law  establishing  the  State  Bank 
of  Iowa  bears  very  strongly  the  impress  of  S.  J.  Kirkwood's 
ideas.  In  the  State  Senate  he  presented  numerous  amend- 
ments which  were  adopted.^  ^^  He  had  but  recently  come  to 
Iowa  (in  1855)  after  twenty  years  in  the  practice  of  law  in 
Ohio,  where  he  had  also  taken  an  active  part  in  political 
affairs.^^^ 

Control  of  the  State  Bank  as  a  whole  was  vested  in  a 
Board  of  Directors  consisting  of  one  director  representing 
each  branch  and  three  directors  representing  the  State. 
The  original  State  directors  named  in  the  statute  were 
Benjamin  Lake  of  Clinton  County,  Hoyt  Sherman  of  Polk 
County,  and  Elias  H.  Williams  of  Clayton  County.  Their 
compensation,  to  be  paid  by  the  State,  was  fixed  at  $3  per 
day  and  mileage.  Their  term  of  office  was  two  years.  No 
stockholder,  officer,  or  employee  of  a  branch  bank  could  serve 
as  a  State  director.^^^  Not  infrequently  the  president  of  the 
branch  served  as  the  representative  of  his  branch  on  the 
Board  of  Directors  of  the  State  Bank.  Voting  at  board 
meetings  was  roughly  adjusted  to  the  capital  stock  of  the 
branch.  Each  member  of  the  board  was  entitled  to  two 
votes,  plus  one  additional  vote  for  each  $50,000  of  the  paid- 
up  stock  of  his  branch  in  excess  of  $100,000.  Directors 
were  required  to  give  bond,  and  to  take  oath  that  they  would 
''faithfully,  diligently,  and  impartially"  perform  their 
duties.^^^ 

The  most  important  specific  duties  of  the  Board  of  Direc- 
tors were  to  pass  upon  the  applications  of  new  branches, 
supervise  the  note  issue,  make  examinations,  and  publish 
the  monthly  statements.  They  also  formulated  general 
policies  for  the  system  as  a  whole.  If,  upon  examination, 
they  found   a  branch  in  dangerous   condition  they  were 


THE  STATE  BANK  OF  IOWA  87 

authorized  to  assume  full  control  of  its  affairs.  They  ap- 
proved and  allowed  the  dividends  of  each  branch.  They 
elected  their  own  officers  and  appointed  a  permanent  secre- 
tary from  outside  their  own  number.  Broadly  speaking, 
they  had  final  authority  over  all  of  the  bank's  affairs.^^^ 

Thirty  was  the  maximum  number  of  branches  sanctioned 
by  law.  No  branch  could  be  organized  in  a  town  having  less 
than  500  population;  and  in  no  case  could  more  than  one 
branch  be  organized  in  any  town  or  city.  The  name  of  the 
branch  must  include  the  name  of  the  town.232  Beyond  the 
limitation  of  one  to  a  town  there  was  no  geographical  limita- 
tion on  the  distribution  of  branches.  An  amendment  to 
place  the  minimum  distance  between  branches  at  twenty 
miles  was  defeated  in  the  Senate.^^^ 

Branches  could  be  organized  by  any  number  of  persons, 
not  less  than  five.  The  capital  stock  of  each  branch  was  to 
be  from  $50,000  to  $300,000,  with  the  aggregate  for  all 
branches  limited  to  $6,000,000.  Fifty  per  cent  of  the  capital 
stock  must  be  paid  in  specie  and  must  be  in  the  possession 
of  the  branch  as  its  bona  fide  property  upon  the  commence- 
ment of  business.  The  remaining  fifty  per  cent  must  also 
be  paid  in  specie  in  ten  per  cent  installments.  Unless  other- 
wise ordered  by  the  directors  of  the  State  Bank,  these  in- 
stallments must  be  paid  every  four  months. 

Two  provisions  of  the  law  were  designed  to  obtain  wide 
distribution  for  the  stock.  Each  branch  was  required  to 
give  twenty  days'  public  notice  before  opening  the  stock 
book  for  subscriptions.  On  the  first  day  upon  which  sub- 
scriptions were  received,  ten  shares  of  $100  each  was  the 
maximum  amount  of  stock  which  any  subscriber  was  per- 
mitted to  buy.  In  case  all  the  stock  was  not  subscribed  for 
on  one  day,  the  total  which  any  individual  or  firm  could 
purchase  was  raised  to  fifty  shares.  If,  upon  closing  the 
subscription  books  at  the  close  of  the  second  day,  the  amount 
subscribed  did  not  equal  the  capital  authorized,  the  maxi- 


88  HISTORY    OF    BANKING    IN    IOWA 

mum  limit  was  removed  entirely — it  evidently  being  as- 
sumed that  small  purchasers,  in  the  meantime,  had  had 
plenty  of  opportunity  to  make  their  subscriptions. 

Stockholders  were  subject  to  double  liability  in  case  of 
the  failure  of  a  branch. ^^^  In  this  respect  Iowa  was  one 
of  the  pioneer  States.  Massachusetts  in  1849  and  New 
York  in  1846  were  among  the  States  that  had  earlier  adopted 
special  liability  for  stockholders  in  banking  corporations.^^® 
Stock  of  the  State  Bank  was  made  freely  transferable,  but 
in  order  to  protect  creditors  no  individual  was  allowed  to 
sell  his  stock  as  long  as  he  was  indebted  to  the  bank.  Trans- 
fer of  stock  did  not  relieve  the  seller  of  responsibility  for 
liabilities  accruing  while  the  stock  was  in  his  possession. 
Eecord  of  the  stock,  as  shown  in  the  stock  book,  was  on  file 
with  the  recorder  of  deeds  in  the  county  where  the  branch 
was  located.  In  case  of  suit  this  was  prima  facie  evidence 
of  ownership,  although  the  real  owner  was  held  liable,  even 
when  the  ownership  appeared  on  the  books  in  the  name  of 
another  person.^^^ 

The  position  of  creditors  of  the  branches  was  further 
strengthened  by  the  provision  that  the  capital  stock  could 
not  be  impaired  to  pay  dividends.  Loans  to  stockholders 
were  limited  to  four  months '  duration,  and  the  stockholders 
collectively  could  not  at  any  time  owe  more  than  three- 
fifths  of  the  amount  of  the  paid-up  capital.  With  certain 
minor  exceptions,  a  branch  could  not  buy  its  own  stock  nor 
the  stock  of  any  other  incorporated  company.  The  banks 
were  thus  restrained  from  speculation,  and  banking  capital 
could  not  be  reduced  by  inter-ownership  of  stock.  One  rea- 
son for  placing  the  latter  restriction  in  the  law  was  that 
banking  corporations  of  the  mid-nineteenth  century  in- 
dulged sometimes  in  the  practice  of  buying  their  own  stock, 
thereby  reducing  the  actual  capital  of  the  institution  below 
the  nominal  amount.  Moreover,  it  was  especially  desirable 
to  prevent  the  holding  of  stock  in  other  banks.    Unless  so  re- 


THE  STATE  BANK  OF  IOWA  89 

stricted  one  branch  might  control  one  or  more  of  the  others 
through  ownership  of  a  majority  of  its  stock.  A  monopoly- 
might  thus  be  created,  and  in  any  case  the  total  strength  of 
the  State  Bank  would  be  weakened  in  time  of  stress.  Fail- 
ure of  any  branch  holding  considerable  stock  in  several  other 
branches  would  seriously  cripple,  if  it  did  not  entirely 
force  under,  the  subsidiary  branches.  As  a  safety  measure, 
therefore,  the  prohibition  on  stock  investment  was  a  wise 
restriction.^^'^ 

Management  of  each  branch  was  vested  in  a  Board  of 
Directors,  elected  annually  by  the  stockholders.  At  all 
stockholders '  meetings  each  share  of  stock  was  allowed  one 
vote.  The  number  of  directors  might  vary  from  five  to 
nine.  In  order  to  be  qualified  for  the  office  of  director  the 
stockholder  must  be  a  citizen  of  the  United  States  and  a 
resident  of  Iowa  during  his  whole  term  of  office.  Directors 
were  required  to  take  oath  diligently  and  honestly  to  per- 
form their  duties — this  oath  to  be  filed  with  the  county  re- 
corder. Directors  collectively  were  not  permitted  to  owe 
to  the  branch  of  which  they  were  officers  an  amount  exceed- 
ing one-fifth  of  the  capital  stock  of  which  they  were  bona 
fide  owners.^^^ 

Bankers  of  the  twentieth  century  do  not  consider  note 
issue  an  essential  function  of  commercial  banking,  but  to 
the  banker  of  the  mid-nineteenth  century  this  function  was 
still  very  important.  The  early  bankers,  instead  of  grant- 
ing the  borrower  book  credits  in  the  form  of  a  deposit  which 
he  might  transfer  by  means  of  a  check,  handed  him  the 
bank's  notes.  Notes  issued  on  this  "banking  principle" 
were  essentially  the  same  sort  of  liability  for  the  banker  as 
his  deposits.  When  the  State  Bank  of  Iowa  was  chartered 
the  necessity  of  guarding  the  interests  both  of  note  holders 
and  of  depositors  was  recognized,  but  by  far  the  most  legis- 
lative attention  was  devoted  to  the  regulation  of  note  issue. 
Since  note  issue  provisions  formed  such  a  large  part  of  the 


90  HISTORY   OF    BANKING   IN   IOWA 

act  incorporating  the  State  Bank,  this  phase  of  the  law  is 
reserved  for  special  treatment. 

Important  restrictions  placed  upon  the  deposits  of  the 
branches  were:  each  branch  was  required  to  keep  a  specie 
reserve  of  twenty-five  per  cent  against  its  current  deposits, 
in  addition  to  the  same  specie  reserve  against  circulation; 
and  branches  were  prohibited  from  paying  interest  on  cur- 
rent deposits.  The  amount  due  depositors  was  to  be  re- 
ported separately  in  the  regular  monthly  statement  required 
by  the  law.  Notes  were  made  a  prior  claim  over  deposits 
in  the  settlement  of  the  affairs  of  an  insolvent  branch.  This 
was  done  on  the  generally  accepted  theory  that  a  note  holder 
usually  is  an  involuntary  creditor  of  the  bank,  whereas  the 
depositor  voluntarily  chooses  the  place  of  deposit  after  in- 
vestigation. ^^^ 

During  the  early  part  of  the  nineteenth  century  the  bank- 
ing business  was  surrounded  with  great  secrecy.  Accord- 
ing to  its  charter  the  First  Bank  of  the  United  States  was 
required  to  make  regular  returns  to  the  Treasury  Depart- 
ment, but  only  two  of  these  reports  were  ever  published. 
The  legislatures  of  most  States  did  not  require  reports 
from  banks  until  well  toward  the  middle  of  the  century. 
Sometimes  reports  were  called  for,  but  no  penalties  were 
provided  for  failure  to  make  returns.  Specific  forms  were 
not  prescribed,  hence  ambiguities  and  inaccuracies  crept 
in.24o  In  this  respect  the  founders  of  the  State  Bank  of 
Iowa  took  a  very  advanced  position.  Certified  statements 
of  the  condition  of  each  branch  were  required  to  be  made 
on  the  first  Monday  in  each  month.  This  statement  was  to 
be  transmitted  to  the  Auditor  of  State  and  to  the  State 
Bank.  The  form  of  the  report  specified  seventeen  distinct 
items  on  which  information  was  to  be  given.  An  abstract 
of  the  statement  was  to  be  published  in  some  newspaper  of 
the  county  and  a  copy  was  to  be  sent  to  each  branch  of  the 
State  Bank.     The  directors  of  the  State  Bank  were  re- 


THE  STATE  BANK  OF  IOWA  91 

quired  to  publish  a  consolidated  abstract  of  these  monthly 
reports  in  some  newspaper  published  at  Iowa  City,  the  loca- 
tion of  the  head  office  of  the  bank,  as  soon  after  the  first  of 
the  month  as  practicable.  Judged  by  our  present  standard, 
this  system  of  regular  monthly  statements  was  a  weak  one ; 
but  it  was,  nevertheless,  a  notable  advance  in  the  matter 
of  giving  publicity,  and  was  a  safe  method  of  determining 
the  bank's  condition.  Supplemented  as  it  was  by  examina- 
tion of  the  branches  by  the  State  Bank  directors,  it  proved 
an  adequate  method  of  supervision  of  the  general  condition 
of  those  branches.  The  present-day  practice  of  calling  for 
way  of  obtaining  bank  statements,  but  this  plan  was  not  in- 
troduced until  several  years  later  when  it  was  made  a  fea- 
ture of  the  national  banking  system  and  later  was  adopted 
for  State  banks.^" 

Interest  or  discount  on  loans  was  fixed  at  ten  per  cent 
until  the  first  day  of  January,  1863 ;  after  that  no  more  than 
eight  per  cent  was  to  be  charged.  Discounting  was  allowed 
and  exchange  could  be  charged  at  the  current  rate  upon  a 
bona  fide  bill  or  note  payable  at  some  other  than  the  place 
of  discount.  To  charge  a  rate  higher  than  the  legal  rate 
was  usury,  and  caused  the  entire  debt  to  be  forfeited  unless 
made  to  a  director  or  stockholder,  in  which  case  it  was  a 
valid  claim.  A  second  restriction  was  that  loans  were  lim- 
ited to  four  months  time.  This  prevented  loans  and  dis- 
counts for  land  purchase,  a  practice  which  had  wrecked 
many  banks  in  1837  and  again  in  1857.  The  time  limitation 
took  into  consideration  that  principle  of  commercial  bank- 
ing which  recognizes  that  a  bank's  assets  should  be  kept  in 
easily  liquidated  short-time  paper.  A  limit  of  four  months 
would  seem  to  have  been  rather  rigid  in  an  agricultural 
community,  experience  having  since  demonstrated  that 
prime  agricultural  paper  may  have  a  maturity  of  six  months 
at  least.2« 


92  HISTORY    OF    BANKING    IN    IOWA 

During  the  period  of  the  State  Bank  and  the  decade  fol- 
lowing, during  which  the  national  banking  system  was  domi- 
nant, long  time  credit  was  of  necessity  supplied  by  other 
institutions.  The  available  facts  concerning  these  institu- 
tions were  very  meager.  It  is  known  that  some  of  the 
private  banks  survived  the  panic  of  1857  and  continued  to 
carry  on  their  business,  which  included  a  great  deal  of  loan- 
ing on  mortgage  security.  The  number  of  private  banks  in 
Iowa  in  1875  was  approximately  two  hundred.  We  have 
no  means  of  knowing  how  many  of  these  were  in  operation 
contemporaneously  with  the  State  Bank,  but  doubtless  a 
considerable  number  had  their  origin  before  the  close  of  its 
career.  Directly  and  indirectly  they  supplied  the  long  time 
credit  to  the  Iowa  borrowers. 

Collectively  the  stockholders  could  not  borrow  more  than 
three-fifths  of  the  amount  of  the  paid-up  capital;  and  the 
directors  of  any  branch  could  not  owe  more  than  one-fifth 
of  the  amount  of  the  stock  owned  by  them  collectively.  The 
section  relating  to  the  maximum  indebtedness  which  any 
individual  might  contract  with  a  branch  is  not  clearly  stated. 
It  appears,  however,  that  no  person,  company,  or  several 
members  of  a  firm  collectively  could  owe  on  a  single-name 
promissory  note  more  than  one-twentieth  of  the  amount  of 
the  circulation  which  the  branch  was  authorized  to  issue. 
On  the  first  $100,000  or  less  of  paid-up  capital  the  branches 
were  allowed  to  issue  notes  at  a  rate  of  two  to  one.  The 
maximum  individual  loan  was,  therefore,  ten  per  cent  of 
the  paid-up  capital — the  ratio  shortly  afterward  adopted  in 
the  national  banking  law.  Branches  were  allowed  to  dis- 
count bona  fide  bills  of  exchange,  payable  out  of  the  State, 
bearing  the  acceptance  of  one  individual  or  firm  to  an 
amount  equal  to  one-fourth  of  its  circulation.  A  further 
clause  was  included  to  the  effect  that  no  person  or  firm  could 
be  indebted,  exclusive  of  liability  as  an  acceptor,  to  an 
amount  in  excess  of  one-tenth  of  the  circulation.  This  would 


THE  STATE  BANK  OF  IOWA  93 

seem  to  mean  that  the  branch  could  discount  bills  of  ex- 
change for  one  firm  only  up  to  ten  per  cent  of  its  maximum 
note  issue,  or  twenty  per  cent  of  its  capital.  This  appears, 
however,  to  have  been  in  addition  to  the  one-twentieth  lia- 
bility on  single-name  paper.  It  is  clear  why  a  larger  line  of 
credit  was  granted  on  double-name  than  on  single-name 
paper,  but  the  relatively  high  amount  of  paper  which  could 
be  discounted  bearing  the  acceptance  of  one  firm  is  not 
easily  understood.  The  wording  of  the  statute  limits  the 
amount  of  the  latter  to  one-fourth  of  the  bank's  circulation 
when  the  bills  were  payable  outside  of  the  State,  but  made 
no  express  limitation  in  any  other  case.^'*^ 

The  loans  of  the  bank  were  further  limited  to  those  made 
on  personal  security.  An  early  ruling  of  the  Board  of  Direc- 
tors of  the  State  Bank  interpreted  this  to  prohibit  taking 
collateral  security.  Shortly  afterwards  the  board  reversed 
itself  and  decided  that  section  twenty-three  of  the  act  was 
intended  to  prevent  the  taking  of  real  estate  security. 
Thereafter  the  branches  were  allowed  to  use  their  own  dis- 
cretion in  the  matter  of  taking  collateral.^^^  They  were  not 
allowed,  however,  to  take  a  lien  on  any  part  of  their  capital 
stock;  and  the  same  security  was  required  from  sharehold- 
ers as  from  other  borrowers.^^^ 

The  banks  were  prohibited  from  owning  real  estate  be- 
yond the  amount  in  each  case  ''necessary  for  the  convenient 
transaction  of  its  business".  If  it  became  necessary  to 
purchase  at  execution  sale,  or  to  take  over  real  estate  to 
secure  payment  of  a  debt  previously  contracted,  the  real 
estate  was  to  be  sold  as  soon  as  possible  without  loss.  The 
branch  was  required  to  offer  such  real  estate  for  sale  pub- 
licly at  least  once  a  year.  Subject  to  these  restrictions  the 
branches  had  power  to  transact  a  general  banking  business. 
They  could  issue  notes  furnished  by  the  State  Bank,  loan 
money,  buy,  sell,  and  discount  bills  of  exchange,  notes,  and 
other  written  evidences  of  debt,  receive  deposits,  buy  and 


94  HISTORY    OF    BANKING    IN    IOWA 

sell  coin  and  bullion,  make  collections,  and  do  any  other 
business  properly  appertaining  to  banking.^*® 

NOTE  ISSUE 

The  provisions  of  the  State  Bank  law  regulating  note 
issue  were  drawn  with  care  in  order  to  insure  a  uniform  and 
sound  circulating  medium.  For  the  protection  of  note 
holders  the  two  plans  most  commonly  adopted  in  banks 
under  State  charter  before  the  Civil  War  were  the  free 
banking  plan,  having  all  note  issues  secured  by  interest  bear- 
ing bonds,  and  the  safety  fund  plan.  Ohio  had  adopted  the 
safety  fund  plan  in  the  law  of  February  24,  1845,  creating  a 
State  bank.^*'^  This  plan,  having  proven  successful  in  Ohio, 
was  copied  in  the  act  creating  the  State  Bank  of  Iowa.  But 
a  more  important  protection  than  the  safety  fund  was  the 
provision  that  the  branches  were  mutually  responsible  for 
all  of  the  notes  issued.  No  occasion  ever  arose  in  the  his- 
tory of  the  State  Bank  of  Iowa  to  make  use  of  the  safety 
fund,  but  the  mutual  responsibility  provision  early  saved 
the  note  holders  of  one  branch  from  loss  and  avoided  for  the 
bank  public  disfavor. 

The  safety  fund  for  the  redemption  of  notes  consisted  of 
either  money  or  bonds  to  an  amount  equal  to  twelve  and 
one-half  per  cent  of  the  circulating  notes  delivered  to  the 
branch.  It  was  specified  that  the  bonds  so  deposited  must 
be  ''United  States  stocks,  or  interest  paying  State  stocks 
at  their  current  value  in  the  city  of  New  York,  but  in  no 
instance  above  their  par  value ' '.  The  money  paid  into  the 
safety  fund  must  also  be  invested,  under  the  direction  of 
the  Bank,  in  the  afore-mentioned  bonds.  Interest  accruing 
on  the  stocks  so  held  was  received  by  the  branches  owning 
the  same.  In  case  of  the  failure  of  any  branch  the  portion 
of  the  safety  fund  belonging  to  the  insolvent  branch  was 
first  to  be  used  to  redeem  its  outstanding  notes.  The  solvent 
branches  could  then  be  called  upon  to  make  up  losses  of  the 


THE  STATE  BANK  OF  IOWA  95 

insolvent  branch.  It  was  a  mutual  liability  only  for  note 
issue,  and  no  part  of  the  safety  fund  except  that  belonging 
to  the  failed  branch  was  to  be  called  upon  for  payment  of 
other  liabilities.^^^ 

The  administration  of  the  safety  fund  was  in  the  hands 
of  the  President  of  the  Bank.  In  November,  1860,  the  Pres- 
ident was  given  power  to  require  any  branch  to  deposit 
additional  security  in  the  safety  fund  if  its  bonds  declined 
so  that  in  his  judgment,  with  the  concurrence  of  the  Execu- 
tive Committee,  the  interests  of  the  Bank  required  such 
deposit.  Again,  just  at  the  outbreak  of  the  Civil  War,  a 
resolution  was  adopted  providing  that  the  safety  fund  be 
made  good  by  a  return  of  circulation  or  by  depositing  coin 
or  bonds.  This  was  accompanied  by  a  resolution  to  the 
effect  that  bonds  of  Southern  States  were  not  to  be  received 
for  the  safety  fund.  At  first  the  bonds  were  kept  in  the 
office  at  Iowa  City,  but  in  November,  1861,  the  President 
was  directed  to  remove  the  bonds  belonging  to  the  safety 
fund  to  the  vault  of  the  Merchants  Branch  at  Davenport  for 
safe  keeping.249 

To  limit  the  volume  of  circulating  notes  and  to  make  sure 
of  their  prompt  redemption,  two  restrictions  were  adopted. 
The  volume  of  circulation  bore  the  following  proportion  to 
the  capital  stock :  on  the  first  $100,000  or  any  lesser  amount 
of  its  capital  actually  paid  in,  the  branch  could  issue  notes 
to  twice  the  amount;  for  the  second  $100,000  this  propor- 
tion was  reduced  to  one  and  three-fourths  times  the  capital ; 
on  the  third  $100,000,  to  one  and  one-half  times  the  capital. 

A  second  limitation  was  the  requirement  that  a  specie 
reserve  of  twenty-five  per  cent  of  the  circulation  must  at 
all  times  be  kept  on  hand  in  the  vault  of  the  issuing  branch. 
Whenever  the  volume  of  notes  outstanding  exceeded  this 
proportion  the  bank  was  not  permitted  to  put  any  more 
notes  in  circulation,  nor  to  increase  its  liabilities  by  making 
new  loans  or  discounts,  except  to  purchase  sight  bills  of 


96  HISTORY   OF    BANKING   IN   IOWA 

exchange,  nor  to  pay  any  dividend  until  the  proper  propor- 
tion was  restored.^^*^  The  Bank  strictly  enforced  this  statu- 
tory requirement  even  during  the  exceptional  circumstances 
of  the  Civil  War.  When  there  was  general  suspension  of 
specie  payments  and  the  banks  were  redeeming  their  notes 
in  national  bank  notes  and  United  States  treasury  notes, 
the  branches  were  tempted,  by  the  possible  profit,  to  sell 
gold  at  a  high  premium.  This  policy  was  promptly  opposed 
by  the  Bank.  Any  branch  violating  the  statute  in  this  re- 
spect was  called  to  account.  For  instance,  the  Iowa  City 
branch,  in  February,  1864,  was  given  an  opportunity  until 
the  next  meeting  of  the  Board  to  restore  the  proper  equilib- 
rium between  specie  and  circulation.  At  a  later  meeting 
in  the  same  year,  the  branches  were  directed  to  keep  at  all 
times  in  their  own  vaults  in  coin  twenty-five  per  cent  of 
their  outstanding  circulation.^^^ 

Specie  redemption  of  bank  notes  was  a  cardinal  prin- 
ciple of  the  State  Bank  of  Iowa.  Failure  on  the  part  of  any 
branch  to  redeem  its  notes  promptly  in  specie  when  de- 
manded at  its  banking  house  during  the  usual  banking  hours 
was  to  be  deemed  an  act  of  insolvency.  The  entire  business 
and  property  of  such  a  branch  must  be  immediately  taken 
over  by  the  State  Bank.  The  State  Bank  would  then  ap- 
point an  examining  committee  and  a  receiver  for  the  branch ; 
its  affairs  would  be  settled  and  the  debts  paid  as  fully  as 
possible.  The  notes  would  all  be  promptly  redeemed  by 
the  State  Bank,  the  safety  fund  of  the  several  branches 
being  later  reimbursed  from  the  assets. 

By  the  terms  of  the  law  the  denominations  of  notes  were 
$1,  $2,  $3,  $5,  $10,  $20,  $50,  and  $100.  Small  notes  were  in 
general  disfavor.  In  the  Senate,  during  the  consideration 
of  the  bill,  a  motion  to  prohibit  all  notes  below  $5  was 
passed  by  a  majority  of  a  single  vote.  An  attempt  to  raise 
the  minimum  to  $20  was  decisively  beaten.  The  House  of 
Representatives  restored  the  provision  of  the  bill  permit- 


THE  STATE  BANK  OF  IOWA  97 

ting  a  limited  proportion  of  small  notes.     In  the  conference 

on   the   House    amendments    the    Senate    agreed    to    this 

change.^^^     The  percentage  of  small  notes  was  limited  as 

follows :  not  more  than  ten  per  cent  of  the  amount  issued 

by  any  branch  could  be  in  notes  of  $1  each,  not  more  than 

ten  per  cent  in  notes  of  $2  each,  not  more  than  twenty-five 

per  cent  in  notes  of  all  denominations  under  $5,  and  not 

more  than  fifty  per  cent  in  notes  of  all  denominations  under 
$10,253 

The  effort  to  prohibit  small  notes  and  the  final  action 
limiting  the  percentage  of  these  notes  was  due  to  the  popu- 
lar dissatisfaction  with  the  so-called  "shinplasters"  or  frac- 
tional currency  of  all  kinds  that  had  made  up  a  large  part 
of  the  circulating  medium.  It  was  hoped  by  such  regula- 
tions to  keep  coin  in  circulation.  Limitation  or  prohibition 
of  small  bank  notes  has  been  commonly  prescribed  in  bank- 
ing laws  even  up  to  the  present  time  and  is  included  in  our 
national  banking  laws.  In  the  United  States,  under  the  na- 
tional banking  system,  government  paper  money  has  met 
the  demand  for  small  notes,  but  in  Iowa  the  only  substitute 
would  have  been  the  small  notes  of  outside  banks.  It  was 
the  realization  of  this  fact  that  led  the  Iowa  legislators  to 
choose  the  limitation  of  the  number  rather  than  the  entire 
prohibition  of  the  issue  of  small  notes  by  the  State  Bank  of 
Iowa. 

No  provision  was  made  in  the  law  and  no  regulation  can 
be  found  in  the  records  of  the  Board  of  Directors  for  frac- 
tional currency.  In  the  collections  of  the  State  Historical 
Society  of  Iowa  are  to  be  found  samples  of  fractional  cur- 
rency which  appear  to  have  been  small  checks  payable  to  the 
bearer  at  the  branches  of  the  State  Bank.  This  currency 
is  in  the  form  of  cards  or  tickets  about  one  and  one-half 
by  two  and  one-half  inches  in  size.  Samples  are  preserved 
of  the  currency  drawn  on  the  branches  at  Iowa  City  and 
Washington.     The  branches  were  directed  to  redeem  the 


98  HISTORY    OF    BANKING    IN    IOWA 

tickets  in  bank  notes  if  presented  in  sums  of  $1.  The  de- 
nominations were  five,  ten,  twenty-five,  and  fifty  cents. 
They  bear  the  date  of  1862,  that  is,  of  a  period  after  the 
general  suspension  of  specie  payments. 

The  form  of  the  bank  notes  was  left  to  the  Board  of  Di- 
rectors, and  was  a  problem  of  considerable  moment  at  the 
first  meeting  of  the  Board.  While  the  directors  desired  to 
get  the  circulation  as  early  as  possible  they  were  also  de- 
sirous of  choosing  a  distinctive  design.  Plates  were  avail- 
able from  which  notes  could  have  been  immediately  struck 
off.  The  Board  finally  referred  the  entire  matter  to  a  com- 
mittee composed  of  Hiram  Price  and  Hoyt  Sherman,  with 
instructions  to  go  east  and  procure  the  bills  required  for 
circulation.^^^  This  delayed  somewhat  the  note  issue,  but 
enabled  designs  to  be  chosen  which  were  related  distinc- 
tively to  Iowa.  The  notes  selected  attracted  favorable  com- 
ment in  the  local  press. ^^^  In  general  they  pictured  fanciful 
rural  scenes,  but  they  also  included  some  pictures  of  his- 
torical interest.  On  the  $1  bill  was  a  cut  made  from  a 
portrait  of  Governor  Robert  Lucas,  the  first  Territorial 
Governor.  The  picture  on  the  $5  bill  was  that  of  Antoine 
Le  Claire,  one  of  the  pioneer  founders  of  Davenport.  The 
$10  bill  had  a  cut  made  from  a  scroll  map  of  Iowa  as  it  was 
before  1856,  and  Governor  Ealph  P.  Lowe's  picture  ap- 
peared in  the  corner.  In  all  cases  the  notes  were  issued  in 
the  name  of  the  State  Bank  of  Iowa ;  and  the  names  of  the 
various  branches  were  written  in  with  a  pen.  All  notes  were 
signed  by  the  president  and  cashier  of  the  branch,  and  reg- 
istered and  countersigned  by  the  Secretary  of  the  State 
Bank.256 

Because  the  name  of  the  branch  was  written  on  the  notes, 
it  was  necessary  to  return  worn  notes  for  exchange  more 
frequently  than  might  otherwise  have  been  necessary.  The 
statute  provided  that  mutilated  currency  be  ''burned  to 


THE  STATE  BANK  OF  IOWA  99 

ashes  in  the  presence  of  the  President  or  Vice  President, 
and  at  least  two  of  the  Directors  of  said  Bank."^^^  This 
order  was  literally  and  conscientiously  carried  out.  Hiram 
Price  describes  the  burning  in  these  words :  *  *  This  burning 
was  done  in  a  large,  old-fashioned,  ten-plate  stove,  in  the 
office  of  the  State  Bank  at  Iowa  City.  Sometimes,  in  warm 
weather,  this  was  by  no  means  a  pleasant  job.  The  door  of 
the  stove  had  to  be  kept  open  so  that  the  witnesses  could 
certify,  not  that  the  mutilated  currency  had  been  put  into 
the  fire  in  the  stove  and  burned,  but  that  the  burning  was 
done  in  the  presence  of  those  who  made  the  certificate."^^* 
He  further  relates  how  they  watched  to  see  that  there  was 
not  draft  enough  to  draw  the  notes  out  of  the  flue  and  that 
the  charred  paper  was  thoroughly  stirred  so  as  to  burn  the 
notes  to  ashes.  The  minutes  of  the  Board  of  Directors  con- 
tain frequent  record  of  the  appointment  of  committees  to 
burn  mutilated  currency.^^® 

ORGANIZATION  OF  THE  BANK 

Shortly  after  the  special  election  of  June  28,  1858,  the 
Governor  called  together  the  Bank  Commissioners  for  the 
purpose  of  putting  the  new  system  into  operation.  The  first 
meeting  was  held  at  Iowa  City  on  July  28,  1858,  at  which 
time  the  commissioners  took  the  oath  of  office.  The  mem- 
bers present  were  C.  H.  Booth,  E.  H.  Harrison,  Ezekiel 
Clark,  W.  J.  Gatling,  C.  W.  Slagle,  Elihu  Baker,  William  S. 
Dart,  and  Edward  T.  Edgington.  After  electing  Ezekiel 
Clark  chairman  of  the  Board  and  William  J.  Gatling  secre- 
tary pro  tem,  they  adjourned  to  meet  at  the  same  place  on 
July  30th.26o 

At  that  time  applications  for  the  establishment  of 
branches  were  received  from  Council  Bluffs,  Oskaloosa,  Ca- 
manche,  Lyons,  and  Washington.  All  these  were  laid  on  the 
table  and  the  Board  adjourned  to  meet  on  September  15th 
to  act  on  applications. 


100  HISTORY    OP    Bz\NKING    IN    IOWA 

The  next  meeting  of  the  Board  was  held  on  September 
15-17,  1858.  Nineteen  applications  were  filed  by  parties  de- 
sirous of  forming  branches  of  the  State  Bank.    These  were : 

No.     1.     Muscatine — Branan  and  others 

No.     2.     Dubuque — Goodrich  and  others 

No.     3.     Washington — Abbott  and  others 

No.     4.     Iowa  City — Kirkwood  and  others 

No.     5.     Davenport — Le  Claire  and  others 

No.     6.     Dubuque — Langworthy  and  others 

No.     7.     Clinton — Sam  Clark  and  others 

No.     8.     Sioux  City — Hubbard  and  others 

No.     9.     Davenport — Macklot  and  others 

No.  10.     Des  Moines — Allen  and  others 

No.  11.     Muscatine — J.  Green  and  others 

No.  12.     Grinnell — Grinnell  and  others 

No.  13.     Council  Bluffs — Noble  and  others 

No.  14.     Wapello — Copeland  and  others 

No.  15.     Oskaloosa — 

No.  16.     Keokuk — Southern 

No.  17.     Mount  Pleasant — 

No.  18.     Sioux  City — J.  W.  Boster  and  others 

No.  19.  Keokuk — Hammell,  Ralston,  and  Company  and 
others 

The  commissioners  at  a  later  meeting  received  applica- 
tions from  Camanche,  Pacific  City,  and  Waterloo,  but  these 
were  laid  on  the  table. ^^^ 

In  order  to  act  intelligently  upon  the  nineteen  applica- 
tions the  Board  referred  them  to  examining  agents  from 
their  own  numbers  for  personal  examination.  A  set  of 
"interrogatories"  was  prepared  and  general  instructions 
agreed  upon  in  order  to  insure  uniformity  and  impartiality 
of  action.  The  Board  then  adjourned,  to  meet  again  on 
October  6th,  and  went  out  two  by  two  as  examining  agents. 
When  the  Board  reassembled  they  found  that  eight  branches 
had  met  all  the  requirements  of  the  law  and  were  entitled 


THE  STATE  BANK  OF  I0V7A  >01 

to  commence  banking.    Certificate  to  that  effect  was  made 
to  the  Governor  naming  the  following  branches: 

1.  The  Muscatine  Branch — Application  No.  1 

2.  The  Iowa  City  Branch — Application  No.  4 

3.  The  Des  Moines  Branch — Application  No.  10 

4.  The  Dubuque  Branch — Application  No.  2 

5.  The  Oskaloosa  Branch — Application  No.  15 

6.  The  Mt.  Pleasant  Branch — Application  No.  17 

7.  The  Keokuk  Branch — Application  No.  19 

8.  The  Merchants  Branch  of  Davenport — Application 
No.  5^62 

There  were  subsequently  established  under  the  authoriza- 
tion of  the  State  Bank  directors,  seven  additional  branches : 
Lyons  City  Branch  of  the  State  Bank  of  Iowa,  February 

17, 1859 
Branch  of  the  State  Bank  of  Iowa  at  Burlington,  March 

18, 1859 
Washington  Branch  of  the  State  Bank  of  Iowa,  March 

18,  1859 
Fort  Madison  Branch  of  the  State  Bank  of  Iowa,  August 

11,  1859 
McGregor  Branch  of  the  State  Bank  of  Iowa,  February 

15,  1860 
Council  Bluffs  Branch  of  the  State  Bank  of  Iowa,  Novem- 
ber 14,  1860 
The  Farmers  Branch  of  the  State  Bank  of  Iowa  at  Ma- 

quoketa,  February  10, 1864^®^ 
These  fifteen  branches  continued  from  the  time  of  admis- 
sion until  the  Bank's  affairs  were  closed  in  1865.     Col- 
lectively they  constituted  the  State  Bank  of  Iowa. 

The  action  taken  on  October  9, 1858,  by  the  Board  of  Com- 
missioners establishing  the  original  eight  branches  was 
communicated  to  each  branch  that  had  been  accepted,  and 
October  27,  1858,  was  set  as  the  date  for  the  first  meeting 
of  the  Board  of  Directors.    The  commissioners  adjourned 


:..G'2:  HL3T0RY    OF    BANKING    IN    IOWA 

until  November  11,  1858,  but  there  is  no  reason  to  believe 
they  ever  assembled  again.  The  record  book  used  by  the 
commissioners  became  the  minute  book  of  the  Board  of  Di- 
rectors. In  it  the  record  closes  with  the  meeting  of  October 
9th.  The  commissioners  were  responsible  only  for  getting 
the  system  established.  At  the  first  directors'  meeting 
Ezekiel  Clark,  President  of  the  Board  of  Bank  Commis- 
sioners, turned  over  to  the  directors  all  the  books,  papers, 
and  documents  in  the  possession  of  the  commissioners.^®* 
Thereafter  the  responsibility  for  the  conduct  of  the  State 
Bank  rested  on  the  Board  of  Directors. 

The  first  meeting  of  the  Board  of  Directors  was  held  in 
the  Council  Chamber  of  the  Old  Capitol  at  Iowa  City  on 
October  27,  1858.    The  members  present  were : 
W.  T.  Smith,  representing  the  Oskaloosa  Branch 
Samuel  F.  MiUer,  representing  the  Keokuk  Branch 
P.  M.  Casady,  representing  the  Des  Moines  Branch 
S.  J.  Kirkwood,  representing  the  Iowa  City  Branch 
Chester  Weed,  representing  the  Muscatine  Branch 
Richard  Bonson,  representing  the  Dubuque  Branch 
Timothy  Whiting,  representing  the  Mt.  Pleasant  Branch 
Hiram  Price,  representing  the  Davenport  Branch 
Benjamin  Lake,  representing  the  State  of  Iowa 
Hoyt  Sherman,  representing  the  State  of  Iowa 
S.  J.  Kirkwood  was  elected  president  pro  tem  and  Hoyt 
Sherman  secretary  pro  tem.    By-laws  were  adopted  and  a 
permanent  organization  effected.    Chester  Weed  of  Musca- 
tine was  elected  President  and  Elihu  Baker  of  Cedar  Rap- 
ids,   Secretary.     Mr.    Baker   continued   in    that   capacity 
throughout  the  history  of  the  bank.    In  February,  1860,  Mr. 
Weed  was  succeeded  by  Hiram  Price,  who  was  President 
from  that  date  until  the  bank  closed  in  1865.^®^ 

The  principal  business  before  the  first  directors'  meet- 
ing was  the  adoption  of  by-laws  and  of  plans  to  obtain  cir- 
culating notes.    It  was  provided  in  the  by-laws  that  there 


THE  STATE  BANK  OF  IOWA  103 

should  be  regular  quarterly  meetings  of  the  Board  of  Di- 
rectors on  the  first  Wednesday  after  the  second  Monday  of 
February,  May,  August,  and  November.  Special  meetings 
might  be  held  at  the  call  of  the  President  or  of  any  four 
members  of  the  Board.  The  regular  officers  were  Presi- 
dent, Vice  President,  and  Secretary.  These  men  were  to  be 
elected  annually  at  the  February  meeting  of  the  Board,  the 
first  election  to  be  at  the  time  of  organization,  and  the  first 
regular  election  to  occur  in  February,  1860. 

The  duties  of  the  President  included  the  usual  duty  of 
presiding  at  meetings.  In  addition  he  had  charge  and  gen- 
eral oversight  of  the  office  at  Iowa  City.  He  was  required 
to  make  examinations  of  the  branches.  At  each  regular 
session  of  the  Board  he  made  a  written  report  of  matters 
that  concerned  the  Bank  or  branches.  This  report  must 
include  any  matter  requiring  action  by  the  directors.  He 
was  originally  allowed  a  salary  of  $1200  per  year  and  ex- 
penses incurred  in  visiting  and  examining  the  branches. 
This  was  put  on  a  per  diem  basis  after  February,  1863,  and 
the  compensation  was  reduced.  He  was  required  to  give 
bond  of  $100,000  and  to  discharge  honestly  and  faithfully 
the  duties  of  the  office. ^^^  When  we  consider  the  responsi- 
bility undertaken  and  the  amount  of  work  involved,  this  pay 
seems  hopelessly  inadequate  to  command  the  highest  ability. 
Hiram  Price,  the  President  during  all  but  the  first  year, 
speaks  of  the  inadequacy  of  the  salary  but  seems  entirely 
satisfied  to  have  earned  from  his  associates 'and  all  those 
interested  the  ''better  and  more  valuable  pay"  of  ''well 
done,  good  and  faithful  servant. '  '^^'^ 

The  Vice  President  was  required  to  assume  the  duties  of 
the  President  in  his  absence  and  to  make  examination  of  the 
branch  represented  by  the  President  as  director.  By  virtue 
of  his  office  he  was  a  member  of  the  Executive  Committee  of 
three  members  who  met  monthly  at  Iowa  City  to  examine 
statements  of  the  branches  and,  if  they  deemed  necessary. 


104  HISTORY    OF    BANKING    IN    IOWA 

to  cause  a  personal  examination  of  the  condition  of  any 
branch  to  be  made.  This  committee  also  examined  the 
accounts  of  the  Secretary  and  in  general  the  condition  of  the 
State  Bank.268 

The  Secretary  was  given  the  duty  of  keeping  the  books 
and  accounts  of  the  head  office  at  Iowa  City.  He  was  re- 
quired to  register  and  countersign  all  notes  issued  for  cir- 
culation and  keep  a  record  of  the  same.  His  salary  was 
$1500  per  year,  payable  quarterly.  This  position  was  filled 
by  Elihu  Baker  during  the  entire  life  of  the  Bank.  At  the 
last  regular  meeting  of  the  Board  a  resolution  was  adopted 
commending  Mr.  Baker  for  the  ' '  skill  and  ability  with  which 
he  has  discharged  the  arduous  and  complicated  duties  of 
Secretary  of  this  Board.  "^'^^ 

Directors  were  not  paid  a  salary  for  their  services.  At 
first  they  were  allowed  a  per  diem  of  $3  for  attending  di- 
rectors' meetings  and  mileage  at  the  rate  of  fifteen  cents 
per  mile.  At  the  meeting  on  August  15, 1860,  it  was  decided 
to  pay  the  per  diem  but  no  mileage.  This  was  rescinded  at 
the  next  meeting  and  the  directors  continued  to  receive  $3 
per  day,  although  the  mileage  was  reduced  to  seven  and  one- 
half  cents  per  mile.^'^"  Salaries  and  other  expenses  were 
met  by  assessments  on  the  branches  in  proportion  to  the 
paid-up  capital  stock.  These  assessments  were  very  small 
relatively.  In  February,  1862,  an  assessment  of  one  mill 
on  the  dollar  was  ordered.  This  was  followed  in  August  by 
an  assessment  of  one  and  one-half  mills  plus  an  additional 
one  mill  to  pay  a  note.  Again  in  May,  1863,  one  and  one-half 
mills  was  assessed.^^^ 

A  special  meeting  of  the  Board  of  Directors  was  called  on 
December  28,  1858,  at  which  time  the  first  installment  of 
notes  was  ordered  to  be  delivered  to  the  directors  of  the 
branches.  The  register  of  circulation  of  the  Iowa  City 
branch  shows  December  30,  1858,  as  the  date  of  receipt  of 
the  first  notes,  the  notes  being  dated  January  1,  1859.    The 


THE  STATE  BANK  OF  IOWA  105 

maximum  circulation  of  two  hundred  per  cent  of  the  capital 
stock  was  allowed  to  the  original  branches  at  the  meeting  of 
the  directors  on  August  11, 1859.-''2 

One  of  the  important  problems  with  which  the  Board 
of  Directors  was  confronted,  especially  during  the  early- 
months  of  the  Bank's  history,  was  the  consideration  of  the 
applications  of  associations  seeking  admission  as  branches. 
In  addition  to  the  seven  branches  admitted  subsequently  to 
the  first  organization,  a  number  of  other  would-be  members 
were  rejected.  The  history  of  the  State  Bank  of  Indiana, 
where  a  single  opposing  vote  could  prevent  the  establish- 
ment of  a  new  branch,  shows  that  dangerous  possibilities 
lurked  in  the  provision  that  membership  in  the  system 
depended  on  the  favorable  vote  of  the  existing  members. 
Logansport  was  kept  out  of  the  Indiana  institution  by  the 
opposition  of  Lafayette.^^^  The  provisions  of  the  Iowa  law 
on  this  point  were  subjected  to  considerable  criticism  during 
the  passage  of  the  act.  But  there  is  no  evidence  to  show 
that  the  directors  excluded  deserving  applicants  in  order  to 
preserve  a  monopoly  for  themselves.  The  Board  of  Com- 
missioners, a  disinterested  body,  rejected  eleven  out  of  nine- 
teen applications  and  declined  to  consider  applications 
from  four  other  towns.  When  the  directors  assumed  this 
function  there  was  thorough  consideration  but  fewer  re- 
jections. 

When  considering  applications  the  Board  exercised  great 
care  in  examining  certificates,  verifying  the  specie  paid  in, 
and  investigating  the  responsibility  of  stockholders.  The 
cost  of  these  examinations  was  borne  by  the  applicants 
whether  accepted  or  rejected.  Applications  from  McGregor 
and  Cedar  Rapids  were  refused  on  the  ground  that  too  large 
a  proportion  of  the  stock  was  owned  outside  of  the  locality 
or  State.  In  the  case  of  McGregor,  $12,000  of  the  $50,000 
authorized  stock  was  owned  in  Dubuque,  and  from  $6000  to 
$7000  was  owned  in  New  Hampshire.     Cedar  Rapids  was 


106  HISTORY    OF    BANKING    IN    IOWA 

rejected  on  the  ground  that  one-fourth  of  the  capital  was 
owned  by  residents  of  Chicago.  It  was  felt  by  the  Board 
that  outsiders  would  have  few  interests  in  common  with  the 
people  of  the  community  for  whose  benefit  the  bank  should 
be  managed.  In  the  case  of  McGregor  the  objection  was  met 
and  admission  followed.  Waterloo  and  Cedar  Falls  were 
simultaneously  rejected  on  the  ground  that  the  establish- 
ment of  a  branch  in  Black  Hawk  County  was  then  of  doubt- 
ful expediency.^^* 

SUPERVISION  OF  THE  BRANCHES 

The  soundness  of  the  provision  for  mutual  responsibility 
of  branches  was  clearly  demonstrated.  A  report  reached 
the  Executive  Committee  that  the  cashier  at  Muscatine  was 
pursuing  an  unwise  policy,  and  an  examination  was  made 
on  January  5,  1860.  It  was  shown  that  the  affairs  of  the 
bank  were  in  bad  condition,  but  it  was  deemed  possible  to 
save  the  branch  and  lessen  the  loss  to  the  bondsmen  of  the 
cashier  by  continuing  in  business  under  the  direction  of  the 
Executive  Committee.  Mr.  Stone,  of  Washington,  a  mem- 
ber of  the  Executive  Committee,  was  given  one  share  of 
stock  and  thereby  qualified  to  act  as  director  and  chairman 
of  the  board  of  directors  of  the  branch.  The  assistance  of 
the  other  branches  was  secured  and  the  affairs  of  the  branch 
were  satisfactorily  arranged.  There  was  loss  to  some  stock- 
holders, but  not  a  cent  was  lost  by  depositors  or  note 
holders.  The  bank  did  not  suspend  its  regular  business  at 
any  time  and  eventually  paid  good  dividends.^'^^ 

At  a  later  date  the  Fort  Madison  branch  became  involved 
in  difficulties  of  a  less  serious  nature.  A  committee  ap- 
pointed to  investigate  its  affairs  reported  on  May  14,  1863, 
that  the  branch  was  in  serious  condition.  They  recom- 
mended that  the  State  Bank  take  charge  of  the  assets  in  the 
interest  of  the  State  Bank  and  of  the  stockholders  of  the 
branch.     Elihu  Baker,  the  Secretary,  was  appointed  re- 


THE  STATE  BANK  OF  IOWA  107 

ceiver,  but  a  proposition  was  made  by  Geo.  P.  Eaton,  cashier 
at  Fort  Madison,  which  proved  satisfactory  for  an  adjust- 
ment of  the  matter.  He  offered  to  deposit  coin,  safety  fund 
securities,  and  currency  to  the  amount  of  $120,000  with  the 
President  of  the  State  Bank.  This  was  done  and  the  entire 
control  of  affairs  of  the  branch  was  left  in  the  hands  of  the 
local  directors.  This  fund  was  to  be  returned  in  proportion 
as  the  branch  retired  circulation.  From  the  records  of  the 
plan  it  seems  to  have  proved  successful,  for  in  November  of 
the  same  year  $25,000  was  returned  and  a  little  over  a  year 
after  the  investigation  all  of  the  special  funds  were  returned 
to  the  Fort  Madison  branch.^^® 

It  must  not  be  inferred  that  it  was  the  policy  of  the  State 
Bank  to  assume  unnecessary  control  over  the  affairs  of  the 
branches.  On  one  occasion  complaints  were  made  against 
the  Mt.  Pleasant  branch.  A  committee  of  the  directors 
appointed  to  consider  these  complaints  reported  that  in  the 
main  the  affairs  were  conducted  properly  and  that  most  of 
the  trouble  was  caused  by  local  jealousy  arising  from  the 
election  of  directors.  The  committee  concluded  that  ''where 
the  safety  and  good  standing  of  the  Branch  is  not  endan- 
gered, it  is  not  a  matter  requiring  the  attention  or  inter- 
ference of  this  Board. ' ' 

Rules  were  laid  down  from  time  to  time  and  orders  issued 
to  the  branches,  but  these  were  general  in  their  nature.  In 
May,  1859,  the  directors  passed  a  resolution  advising  the 
branches  to  keep  their  New  York  and  Boston  accounts  with 
regular  bankers  rather  than  private  bankers.  At  one  time 
the  branches  were  ordered  to  close  their  Chicago  accounts 
with  the  prominent  firm  of  Solomon  Sturges  and  Son  within 
sixty  days  ' '  on  account  of  the  legal  disabilities  under  which 
the  otherwise  responsible  head  of  that  house  is  understood 
to  be  placed  by  his  insanity. ' '  At  their  meeting  on  August 
16, 1860,  the  Board  passed  a  resolution  that  branches  be  re- 
quired to  report  monthly  the  amount  of  overdrafts.^'^'^ 


108  HISTORY   OF    BANKING    IN    IOWA 

AID   DUKING   THE   CIVIL   WAE 

During  the  emergency  of  the  Civil  War  the  State  Bank 
bore  its  share  of  the  burden  of  placing  loans  and  supplying 
credit.  This  aid  was  first  extended  to  the  State  government 
and  later  to  the  Federal  government.  When  the  call  for 
troops  came,  Iowa  was  very  poorly  prepared  to  meet  the 
demands  made  upon  the  Commonwealth.  There  were  no 
arms  or  equipment  for  soldiers,  the  militia  was  unorganized, 
the  financial  administration  was  very  weak,  and  there  were 
no  funds  in  the  treasury.  When  the  Secretary  of  War  called 
upon  Governor  Kirkwood  to  furnish  troops  for  immediate 
service,  the  Governor  promptly  issued  a  call  for  volunteer 
companies.  He  acted  upon  the  assumption  that  the  State 
would  pay  the  expenses  of  the  troops  until  they  were  mus- 
tered into  Federal  service.  The  Governor  wished  to  avoid 
the  expense  of  an  extra  session  of  the  legislature  until  it 
proved  necessary,  but  funds  had  to  be  provided.  It  was  in 
this  crisis  that  the  State  Bank  came  to  the  aid  of  the  Com- 
monwealth.^^^  The  branches  were  prompt  in  offering  the 
Governor  assistance.  Party  spirit  was  entirely  subordi- 
nated to  the  thought  of  service.  Democrats  like  W.  T. 
Smith  of  Oskaloosa  and  W.  F.  Coolbaugh  of  Burlington 
offered  their  financial  support  as  willingly  as  such  staunch 
Republican  bankers  as  Hiram  Price  of  Davenport  and 
Ezekiel  Clark  of  Iowa  City.  J.  K.  Graves  of  Dubuque  noti- 
fied Governor  Kirkwood  to  draw  on  the  branch  of  the  State 
Bank  there  for  thi/ty  thousand  dollars  and  the  draft  would 
be  honored.^^® 

Not  only  did  the  banks  in  their  corporate  capacity  offer 
material  assistance,  but  prominent  among  the  individuals 
who  supported  the  State  finances  in  the  crisis  were  well- 
known  officers  or  stockholders  in  the  State  Bank.  Among 
these  may  be  mentioned  Hiram  Price  of  Davenport,  Ezekiel 
Clark  of  Iowa  City,  Samuel  F.  Miller  of  Keokuk,  and  Gov- 
ernor Kirkwood  himself.^^*' 


THE  STATE  BANK  OF  IOWA  109 

The  Bank  continued  its  aid  to  the  State  government,  pro- 
tecting its  credit  in  every  way  possible,  buying  bonds,  and 
marketing  warrants  in  anticipation  of  revenue  to  be  col- 
lected. The  Dubuque  Herald  sums  up  this  service  in  these 
words:  "The  State  Bank  of  Iowa  has  added  much  both  at 
home  and  abroad  to  the  j&nancial  reputation  of  the  State. 
The  several  branches  made  liberal  advances  to  Governor 
Kirkwood  at  the  commencement  of  the  rebellion  and  now 
own  nearly  two-thirds  of  the  whole  indebtedness  of  the 
State,  the  Dubuque  Branch  alone  owning  one-fifth  of  the 
entire  amount. '  '^^^ 

The  State  Bank  also  aided  in  selling  the  obligations  of 
the  Federal  government.  Treasury  notes  and  bonds  of  the 
United  States  government  were  on  sale  at  the  various 
branches.  For  instance,  in  one  issue  of  the  local  paper  the 
Iowa  City  branch  advertises  that  it  is  the  authorized  gov- 
ernment agency  for  the  United  States  five  to  twenty-year 
six  per  cent  bonds,  and  states  further  that  it  has  on  hand  a 
full  supply  of  all  denominations.  On  another  page  explana- 
tion is  made  of  an  arrangement  whereby  people  with  surplus 
funds  may  buy  two-year  Treasury  notes  bearing  five  per 
cent  interest.  The  State  Bank  had  ordered  $50,000  of  these 
notes  in  denominations  of  $50  and  $100.^^2 

AS  FISCAL  AGENT  OF  THE  STATE 

From  the  outset  the  State  made  a  limited  use  of  the 
branches  of  the  State  Bank  as  its  fiscal  agents.  The  State 
Auditor's  reports  show  balances  in  the  State  Bank  as  fol- 
lows r^^^  November  7,  1859,  $10,035.58;  November  4,  1861, 
$9944.84;  November  2,  1863,  $14,604.82. 

Governor  Lowe  in  I860  recommended  a  more  extensive 
use  of  the  State  Bank  as  a  fiscal  agency.  He  stated  that 
revenue  was  being  paid  into  the  nearest  branch  of  the  State 
Bank  in  the  more  populous  counties  and  thence  forwarded 
to  the  capital  at  the  risk  of  the  Bank  and  on  reasonable 


110  HISTORY   OF   BANKING    IN   IOWA 

terms.  He  favored  extending  this  service  by  disbursing 
on  warrants  directed  to  the  branches.  This,  he  argued, 
would  save  moving  money  in  both  directions,  thus  lessening 
risk  and  expense.  No  action  appears  to  have  been  taken  by 
the  legislature  to  make  this  possible.^^^ 

EEDEMPTION  OF  NOTES  IN  GREENBACKS 

The  most  difficult  problem  in  connection  with  note  issue 
which  confronted  the  Board  of  Directors  during  the  Civil 
War  came  when  the  United  States  government  began  the 
issue  of  Treasury  notes.  Without  waiting  for  this  difficulty 
to  come  before  any  individual  branch  for  discussion  the 
Board  of  Directors  anticipated  the  matter  by  taking  decisive 
action  on  February  12,  1862.  The  President  appointed  a 
committee  to  consider  the  question  and  to  suggest  a  course 
of  action.  The  strength  of  the  Bank  was  shown  to  be  such 
that  it  was  entitled  to  the  confidence  of  the  public.  The 
monthly  report  of  February  3, 1862,  showed  a  specie  reserve 
of  $754,412.23  and  a  circulation  of  $1,111,908  less  $140,000 
held  by  the  banks  themselves.  It  was  expected  that  Con- 
gress, in  passing  the  act  to  authorize  $150,000,000  of  Treas- 
ury notes,  would  make  them  legal  tender.  The  branches 
would  then  be  required  to  receive  them  in  all  payments.  If 
they  continued  to  redeem  their  own  notes  indiscriminately 
their  supply  of  specie  would  be  depleted.  The  parties  to 
benefit  would  be  non-resident  brokers,  at  that  time  engaged 
in  collecting  notes  of  the  Bank.  The  people  of  Iowa  would 
gain  nothing  and  specie  would  be  drained  off  to  the  profit 
of  speculators. 

The  committee,  after  thus  setting  out  the  facts  in  the  situ- 
ation, proposed  that  whenever  the  bill  passed  making 
Treasury  notes  legal  tender  it  would  not,  in  the  opinion  of 
the  Board,  be  a  forfeiture  of  its  charter  for  a  branch  to  use 
Treasury  notes  to  redeem  its  circulation.  While  the  branches 
were  left  to  their  own  discretion  regarding  redemption  for 


THE  STATE  BANK  OF  IOWA  111 

outsiders,  the  committee  held  that  they  must  under  all  cir- 
cumstances redeem  in  coin  for  all  bona  fide  holders  amongst 
the  people  of  the  State.  The  report  of  the  committee  was 
accepted  by  the  Board. 

At  the  May  meeting  of  the  Board  it  was  voted  unani- 
mously that  in  case  of  suit  brought  against  any  branch 
because  of  redemption  in  Treasury  notes  instead  of  specie, 
the  branches  should  mutually  support  one  another  and  pay 
the  costs  in  proportion  to  their  paid-up  capital.  The  Presi- 
dent and  executive  council  were  authorized  to  employ  legal 
counsel,  to  cooperate  with  such  brauph.  In  August,  1862, 
the  President  was  specifically  authorized  to  employ  counsel 
to  defend  a  suit  against  the  Lyons  City  branch.  No  further 
notice  is  found  of  this  matter,  nor  is  there  any  record  of  suit. 

Care  was  exercised  to  see  that  branches  did  not  abuse 
the  privilege  granted  them  in  this  respect.  Charges  were 
made  against  the  branches  at  Burlington,  Keokuk,  Oska- 
loosa,  Lyons  City,  and  Muscatine  by  parties  who  claimed 
that  these  branches  had  committed  an  act  of  insolvency 
by  failing  to  redeem  in  coin.  Committees  were  appointed 
by  the  President  and  in  each  case  the  branch  was  found  to 
have  offered  to  redeem  in  United  States  legal  tender  notes. 
This  was  not  considered  improper  by  the  Bank,  nor  was  it 
regarded  as  an  act  of  insolvency.  As  noted  above,  the 
branches  were  closely  restrained  by  the  Bank  against  dis- 
posing of  their  specie  for  their  individual  profit. ^^^ 

HIGH  STANDING  OF  STATE  BANK  NOTES 

From  its  inception  the  State  Bank  sought  to  establish 
a  sound  currency  in  Iowa.  This  policy  was  continued  dur- 
ing the  Civil  War,  when  the  standard  became  the  United 
States  notes.  In  order  to  attain  this  end  and  to  obtain  the 
profits  from  its  own  circulation,  the  Bank  undertook  to  drive 
out  the  notes  of  unsound  banks  of  neighboring  States.  When 
the  State  Bank  notes  were  first  put  into  circulation  certain 


112  HISTORY    OF    BANKING    IN    IOWA 

brokers  and  private  bankers  made  it  a  policy  to  return  the 
circulation  of  the  branches  for  redemption.  This  was  an 
easy  way  to  obtain  specie  and  might  cause  embarrassment 
to  the  branches.  Chester  Weed,  President  of  the  State 
Bank,  raised  the  question  as  to  the  best  way  to  meet  this 
threatened  run,  whether  to  pay  in  coin  or  furnish  exchange 
at  some  fixed  rate.  The  law  fixing  the  mode  of  redemption 
in  specie  was,  however,  strictly  adhered  to  and  no  trouble 
seems  to  have  developed.^^^ 

By  the  terms  of  the  law  the  State  Bank  was  prohibited 
from  knowingly  putting  doubtful  notes  in  circulation.  At 
an  early  meeting  of  the  Board  a  resolution  was  passed  con- 
demning the  circulation  of  Minnesota  banks.  Branches  were 
advised  not  to  receive  them  in  deposit  or  continue  their  cir- 
culation. Depreciation  of  these  notes  was  so  great  that  the 
President  and  Secretary  were  requested  to  correspond  with 
specie  paying  banks  in  Kentucky,  Ohio,  Indiana,  and  else- 
where relative  to  the  expediency  of  forming  some  organiza- 
tion for  the  purpose  of  establishing  a  rate  of  redeeming 
circulation  as  nearly  uniform  as  practicable  and  to  secure 
for  "a  legitimate  circulation  the  advantages  it  is  entitled 
to."  So  far  as  the  branches  themselves  were  concerned, 
the  directors  early  went  on  record  as  favoring  the  mutual 
protection  of  each  other's  notes.  They  were  advised  to  hold 
State  Bank  notes  and  pay  out  the  circulating  notes  of  for- 
eign banks. 2^'^ 

The  general  acceptability  of  the  notes  was  promoted  by 
the  fact  that  the  notes  of  all  the  other  branches  were  legal 
tender  in  payment  of  any  debt  due  to  a  branch  of  the  State 
Bank.2^^  Iowa  law  required  the  payment  of  taxes  in  specie, 
which  was  a  great  inconvenience  to  taxpayers.  In  his  mes- 
sage to  the  legislature  in  1860  Governor  E.  P.  Lowe  recom- 
mended that  the  notes  of  the  State  Bank  be  received  in  pay- 
ment of  taxes.  He  believed  that  since  the  State  had  given 
its  name  to  the  Bank  and  regularly  appointed  three  of  its 


THE  STATE  BANK  OF  IOWA  113 

directors,  it  should  be  willing  to  receive  its  notes.  On  this 
recommendation  no  action  was  taken  at  that  session  of  the 
legislature.-^*^ 

Upon  the  renewal  of  the  recommendation  in  1862  by  Gov- 
ernor S.  J.  Kirkwood  the  General  Assembly  acted  promptly. 
The  notes  were  made  a  legal  tender  for  all  payments  of 
taxes  and  for  all  payments  of  interest  and  principal  of  the 
school  fund.-*^^  But  a  clause  was  added  to  the  effect  that  the 
notes  were  not  to  be  so  received  after  the  suspension  of 
specie  payments  by  any  one  of  its  branches.  In  the  mean- 
time United  States  Treasury  notes  were  issued  and  made 
legal  tender.  A  general  suspension  of  specie  payments  re- 
sulted and  the  State  Bank  of  Iowa  found  it  necessary  to  sus- 
pend redemption  in  specie  and  substitute  redemption  in 
legal  tender.  Additional  legislation  was  necessary  to  place 
the  State  Bank  notes  on  a  par  with  the  "greenbacks"  and 
the  national  bank  currency  authorized  in  1863.  Governor 
Kirkwood  again  recommended  acceptance  of  State  Bank 
notes  as  long  as  they  were  redeemed  in  legal  tender  notes. 
Again  the  legislature  responded  and  national  bank  notes, 
greenbacks,  and  State  Bank  notes  were  all  received  in  pay- 
ments by  county  treasurers.  This  time  the  branches  of  the 
State  Bank  were  merely  required  by  the  law  to  redeem  their 
issues. 2*^^ 

In  spite  of  the  preference  given  to  notes  of  the  State 
Bank,  foreign  bank  notes  occupied  a  very  large  place  in  the 
circulating  medium.  In  accordance  with  Gresham's  law 
the  circulation  of  the  more  doubtful  bank  currency  seems  to 
have  been  promoted  while  the  notes  of  the  State  Bank,  which 
were  redeemed  promptly  when  presented,  were  hoarded.^^^ 
A  law  to  expel  "wild  cat"  currency  from  Iowa  was  passed 
and  became  effective  on  July  4,  1864.  Since  the  law  did  not 
prohibit  the  circulation  of  national  banks,  it  did  not  give  a 
monopoly  of  note  issue  to  the  State  Bank.  The  opposition 
to  the  bill  was  very  intense  in  both  the  Senate  and  the  House 

8 


114  HISTORY    OF    BANKING    IN    IOWA 

of  Representatives,  since  private  bankers  and  brokers  had 
made  large  profits  by  putting  in  circulation  the  inferior 
notes  of  distant  banks.  The  effects  of  this  law  can  not  be 
accurately  evaluated,  for  in  the  following  year  Congress 
passed  legislation  which  entirely  eliminated  State  bank 
notes.  The  author  of  the  bill,  however,  held  that  it ' '  termi- 
nated the  existence  of  currency  of  doubtful  value  in  the 
State";  but  this  is  an  overestimate  of  its  importance.  Iowa 
could  not  prevent  the  issue  of  such  notes  and,  unaided  by 
national  law,  would  have  found  it  difficult  to  prevent  their 
circulation.  There  was  no  good  reason  why  notes  of  solvent 
specie-paying  banks  of  other  States  should  not  have  be^n 
received.  This  opinion  was  voiced  by  some  of  the  Iowa 
newspapers  in  opposition  to  the  law.  The  brief  period  of  its 
existence  makes  the  question  as  to  the  extent  of  its  enforce- 
ment uncertain.2»* 

In  spite  of  competition  from  notes  of  banks  located  in 
other  States  and  later  from  the  national  banks,  the  volume 
of  circulation  was  large.  The  outstanding  circulation 
passed  the  half -million  dollar  mark  by  the  end  of  the  first 
year.  At  its  maximum,  in  the  early  months  of  1864,  the  note 
circulation  was  over  a  million  and  a  half  dollars.  This  was 
almost  up  to  the  maximum  permitted  by  the  law,  unless  the 
capital  stock  should  be  increased. 

EETIEEMENT  OF  CIECULATION 

The  retirement  of  the  currency  of  the  State  Bank  was 
caused  by  the  establishment  of  the  national  banking  system. 
It  was  on  February  25,  1863,  that  the  national  banking  act 
was  passed  by  Congress.  The  revenue  act  of  March  30, 
1863,  taxed  the  notes  of  State  banks  two  per  cent,  which  was 
just  double  the  tax  imposed  on  the  national  currency.  It 
was  hoped  thereby  to  induce  State  banks  to  come  into  the 
national  banking  system.  But  the  law  was  not  entirely  sat- 
isfactory and  the  growth  of  the  system  was  slow.    In  June, 


THE  STATE  BANK  OF  IOWA  115 

1864,  the  law  was  entirely  revised,  and  on  March  3,  1865,  it 
was  again  amended  with  the  purpose  of  taxing  State  bank 
notes  out  of  existence.  A  ten  per  cent  tax  was  imposed  on 
State  bank  notes  paid  out  by  any  bank  after  July  1,  1866. 
This  ten  per  cent  tax  was  later  extended  to  State  bank  notes 
used  in  payment  by  anyone.  The  legislation  amounted  in 
effect  to  a  prohibition  on  note  issue  by  State  banks  or  by 
any  persons  or  associations. ^^^ 

Even  before  the  passage  of  the  national  banking  act  the 
directors  of  the  State  Bank  of  Iowa  considered  plans  for 
going  into  the  national  system.  On  February  11,  1863,  a 
resolution  was  introduced  at  the  regular  meeting  of  the  di- 
rectors to  provide  for  retiring  the  circulation  of  the 
branches.  This  resolution  was  laid  on  the  table  pending  the 
final  passage  of  a  bill  then  before  Congress.  At  the  May, 
1863,  meeting  of  the  Board,  the  committee  nn  national  cur- 
rency reported  that  in  addition  to  the  currency  procured 
from  the  State  Bank  of  Iowa  any  branch  bank  had  the  right 
to  procure  government  currency  under  the  provisions  of 
section  sixty-two  of  the  national  banking  law.^^^  This  sec- 
tion permitted  banks  organized  under  State  law  to  issue 
circulating  notes  without  becoming  national  banks.  A  State 
bank  to  be  entitled  to  this  privilege  must  be  the  owner  of 
United  States  bonds  to  the  amount  of  fifty  per  cent  of  its 
capital  stock.  By  transferring  these  bonds  to  the  custody 
of  the  Treasurer  of  the  United  States  the  bank  was  entitled 
to  receive  from  the  comptroller  notes  similar  to  national 
bank  notes,  equal  in  amount  to  eighty  per  cent  of  the  amount 
of  the  bonds  so  delivered.^^^  The  report  of  the  committee 
was  accepted  but  no  evidence  appears  that  regulations  gov- 
erning such  action  were  adopted  by  the  directors,  nor  is 
there  any  other  indication  that  this  privilege  was  made  use 
of.  The  terms  of  note  issue  under  the  State  Bank  law  were 
more  liberal,  hence  there  was  at  first  little  reason  for  the 
banks  to  seek  national  currency. 


116  HISTORY    OF    BANKING    IN    IOWA 

The  outstanding  circulation  of  State  Bank  notes  attained 
its  maximum  early  in  1864.  The  revision  of  the  national 
banking  act  of  June,  1864,  made  the  system  more  attractive 
to  State  banks  and  made  it  evident  that  the  purpose  of  the 
national  administration  was  to  supplant  all  State  bank  notes 
by  national  currency.  In  November,  1864,  the  first  steps  to- 
ward contracting  the  State  Bank  circulation  were  taken.  A 
resolution  was  passed  by  the  Board  of  Directors  recom- 
mending that  the  branches  reduce  their  circulation,  within 
the  next  ninety  days,  to  an  amount  equal  to  the  paid-up  cap- 
ital of  each  branch.  At  that  time  the  outstanding  circula- 
tion was  $1,428,432  and  the  capital  $1,031,925.  Thus  the 
contraction  to  the  point  contemplated  involved  retiring 
nearly  a  third  of  the  notes  outstanding.  In  addition  to  this 
contraction  the  branches  were  required  to  provide  redemp- 
tion in  Chicago.^^^ 

At  the  meeting  of  the  Board  in  February,  1865,  prepara- 
tions were  made  to  dissolve  the  State  Bank  and  wind  up  its 
affairs.  All  blank  notes  in  the  custody  of  the  Secretary  were 
burned  by  order  of  the  Board.  Steps  were  then  taken  to 
draw  in  the  circulation  outstanding,  but  these  provisions 
were  prefaced  by  a  resolution  to  the  effect  that  no  branch 
could  be  released  from  its  liability  until ' '  all  the  Circulation 
of  all  the  Branches  is  redeemed  or  its  redemption  is  pro- 
vided for  beyond  a  doubt."  After  the  15th  of  March  the 
branches  were  prohibited  from  paying  out  their  own  notes 
or  the  notes  of  any  other  branch.  At  least  once  each  month 
the  branches  were  required  to  send  to  the  Secretary  all  State 
Bank  notes  in  their  possession.  They  were  also  required  to 
keep  a  redemption  fund  of  two  per  cent  of  their  circulation 
with  the  Secretary.  Stringent  penalties  were  provided  for 
the  violation  of  these  regulations.  S.  J.  Kirkwood  and  S.  D. 
Viele  were  appointed  as  a  special  committee  to  burn  the  cir- 
culating notes  which  came  in  during  the  vacation  of  the 
Board.2^« 


THE  STATE  BANK  OF  IOWA  117 

Steps  were  taken  in  May,  1865,  looking  to  the  complete 
retirement  of  the  circulation.  Before  June  15,  1865,  each 
branch  was  required  to  deposit  with  the  President  of  the 
Bank  approved  securities  or  legal  tender  notes  equal  to 
seventy-five  per  cent  of  its  outstanding  circulation.  The 
amount  so  deposited  by  the  branch  must  remain  in  the  hands 
of  the  President  until,  by  the  redemption  of  its  notes,  the 
amount  of  notes  outstanding  equalled  in  amount  the  secu- 
rities so  held.  Thereafter  the  branch  would  be  permitted 
to  withdraw  securities  in  sufficient  amount  to  keep  the  circu- 
lation and  securities  deposited  equal.  Branches  were  per- 
mitted to  reduce  their  capital  stock  to  $50,000 — provided 
this  did  not  violate  the  law  fixing  the  proportion  of  circula- 
tion to  paid-up  capital.^^^ 

The  last  regular  meeting  of  the  State  Bank  directors  con- 
vened in  Iowa  City  on  August  16,  1865.  A  resolution  was 
passed  that  any  branch  having  a  safety  fund  equal  to  or  in 
excess  of  its  outstanding  circulation  be  permitted  to  divide 
its  capital  stock  as  the  stockholders  deemed  expedient.  Oc- 
tober 31st  was  set  as  the  last  day  upon  which  notes  would 
be  redeemed  through  the  Iowa  City  office.  The  Secretary 
WAS  directed  to  close  the  Iowa  City  office  and  dispose  of  the 
furniture  and  fixtures  before  November  1st.  Any  further 
meeting  of  the  Board  was  to  be  held  in  Davenport  at  the  call 
of  the  President.  S.  J.  Kirkwood  and  S.  D.  Viele  were  ap- 
pointed a  committee  to  act  with  the  President  in  all  matters 
connected  with  closing  up  the  affairs  of  the  Bank.    Their 

action  was  binding  in  the  same  manner  as  a  resolution  of  the 
Board.300 

An  informal  meeting  of  the  Board  was  held  at  Davenport 
on  November  22,  1865.  At  this  meeting  exchanges  were 
made  and  balances  settled  between  the  branches.  The  cir- 
culation returned,  amounting  to  $35,460,  was  burned.  This 
was  the  final  act  in  the  short  but  successful  life  of  the  State 
Bank  of  Iowa.     The  brief  minutes  of  this  meeting  were 


118  HISTORY    OF    BANKING    IN    IOWA 

signed  *'H.  Price,  Prest."  and  written  in  his  handwriting. 
The  minutes  of  all  other  meetings  are  signed  by  '^Elihu 
Baker,  Secty",  frequently  also  with  Mr.  Price's  name;  but 
Mr.  Baker 's  signature  is  not  affixed  to  the  closing  record.^'^^ 
The  branches  thereafter  redeemed  small  amounts  of  the 
circulation  and  burned  it.  State  Bank  currency  had  so  fully 
acquired  the  confidence  of  the  people  that  it  was  a  slow 
process  to  get  it  all  in.  The  circulating  register  of  the  Iowa 
City  branch  shows  that  notes  were  burned  on  August  31, 
1866,  and  on  April  24,  1867,  and  that  the  final  date  of  re- 
demption was  November  14, 1867.^"^  According  to  this  rec- 
ord hundreds  of  dollars  were  never  returned  for  redemption 
— presumably  being  lost  or  destroyed.  In  this  case  it  was 
a  clear  profit  to  the  bank  and  not  to  the  government,  as  is 
the  case  with  notes  lost  or  destroyed  under  the  national 
banking  act. 

BBANCHES  CONVEETED  INTO  NATIONAL  BANKS 

The  chief  function  of  the  State  Bank  had  been  the  super- 
vision of  note  issue.  With  the  retirement  of  the  circulation, 
the  individual  branches  accepted  the  opportunity  of  becom- 
ing national  banks.  At  the  directors '  meeting  in  February, 
1865,  the  Merchants  branch  at  Davenport  was  given  permis- 
sion to  increase  its  capital  solely  for  the  purpose  of  be- 
coming a  national  bank.  The  Burlington  branch  became 
the  National  State  Bank  of  Burlington.  The  Iowa  City  Na- 
tional Bank  succeeded  to  the  business  of  the  branch  at  that 
place,  taking  over  its  deposits  and  business  in  April,  1865. 
The  Des  Moines  branch  became  the  National  State  Bank  in 
1865.  The  Washington  branch  formed  the  First  National 
Bank  on  April  30,  1865.  The  Keokuk  branch  became  the 
State  National  Bank  of  that  place  with  a  capital  of  $150,000. 
Its  successor  is  now  the  State  Central  Savings  Bank. 
Nearly,  if  not  all,  of  the  other  branches  also  entered  the  na- 
tional system.^*'* 


THE  STATE  BANK  OF  IOWA 
VOLUME  OF  BUSINESS 


119 


The  financial  condition  of  the  State  Bank  of  Iowa  during 
its  existence  can  best  be  understood  through  a  study  of 
some  representative  bank  statements  which  are  presented  in 
Table  I.  These  statements  cover  the  period  from  February 
7, 1859,  down  to  April  3, 1865. 

Table  I 


Combined  Statements  op 

THE  Branches  of  the  State  Bank 

OF  lowA^*** 

Assets 

Feb.  7.  1859 

Feb.  6.  1860 

Feb.  4,  1861 

July  7.  1862 

Safety  fund 

$     31,680.40 

$  107,832.71 

$   140,418.19 

$  220.867.27 

Specie 

171,248.64 

284,431.98 

382,478.49 

659.377.86 

Notes    of    other 

BANKS 

82,258.00 

361,658.00 

546,829.00 

459.894.00* 

Due  from   other 

BANKS 

95,365.59 

266,714.32 

345,689.04 

529,393.87 

Loans     and     dis- 

counts 

155.414.49 

822,964.16 

1,186,869.93 

1,175,900.99 

U.    S.    AND   State 

bonds 

Other  items 

27,698.81 

103,001.91 

96,882.88 

78,544.57 

Total  Assets 

563,665.93 

1,945,803.08 

2.699,161.98 

3,123,978.56 

Liabilities 

Capital 

$  215,550.00 

S  473.020.00 

S  614.130.00 

$  737,170.00 

Circulation 

106,798.00 

634,163.00 

652.406.00 

1.149,935.00 

Due  to   other 

BANKS 

32,797.18 

47,855.61 

23,039.00 

Deposits 

235,383.31 

757,542.76 

1,279,498.03 

1,110,453.33 

Other  items 

5,938.62 

49,080.14 

105,272.34 

103,381.23 

Total  Liabilities 

563,665.93 

1,945,803.08 

2,699,161.98 

3.123,978.56 

*  Included  Ui 

lited  States  note 

s 

120 


HISTORY    OF    BANKING    IN   IOWA 
Table  I  (continued) 


Combined  Statements  of 

THE  Branches  of  the  State  Bank 

OF  Iowa 

Abbets 

Dec.  7,  1S63 

Apr.  4,  1864 

Jan.  2,  1865 

Apr.  3,  1805 

Safety  fund 

$  238,900.00 

S  251,905.54 

S  308,905.54 

$  338,228.74 

Specie 

440,285.22 

418,710.01 

389,802.11 

151,049.24 

Notes    of    other 

BANKS 

734,056.02* 

1,050,436.34* 

1,300,481.76* 

811,641.38* 

Due   from   other 

BANKS 

461,196.11 

708,465.29 

668,511.81 

541,822.08 

Loans     and     dis- 

counts 

2,123,146.10 

2,241,283.49 

2,468,362.53 

1,859,368.89 

U.    S.    AND    State 

BONDS 

423,876.83 

440.836.89 

361,182.71 

425,504.37 

Other  items 

104,662.61 

123,824.50 

122,844.95 

132,537.99 

Total  Assets 

4,526,122.89 

5,235,462.06 

5,620,091.41 

4,260,152.69 

Liabilities 

Capital 

$  969,320.00 

$  994,320.00 

$1,048,200.00 

$1,011,000.00 

Circulation 

1,416,811.00 

1,532,739.00 

1,439,764.00 

1,029,526.00 

Due  to  other 

banks 

51,228.82 

91,161.73 

34,929.57 

118,714.94 

Deposits 

1,943,959.69 

2,362,426.00 

2,851,462.10 

1,687,791.73 

Other  items 

144,803.38 

254,815.33 

245,735.74 

413.120.02 

Total  Liabilities 

4,526,122.89 

5.235,462.06 

5,620,091.41 

4,200,152.69 

*  Included  United  States  not 

es. 

It  will  be  noted  that  the  Bank  maintained  a  large  vol- 
ume of  specie  during  the  war  period  when  it  w^as  no  longer 
required  to  redeem  its  notes  in  specie.  The  ''notes  of  other 
specie  paying  banks"  included,  after  1862,  the  United  States 
notes  and  later  national  bank  notes.  Loans  and  discounts 
reached  a  total  of  about  two  and  one-half  millions.  The 
high-water  mark  of  the  Bank's  resources  is  shown  to  be 
January  2,  1865,  when  the  combined  resources  were  over 
five  and  one-half  million  dollars.  Circulation  reached  its 
height  in  April,  1864,  with  a  total  of  over  one  and  one-half 


THE  STATE  BANK  OF  IOWA  121 

million  dollars.  With  the  note  circulation  at  its  highest 
point,  the  deposits  exceeded  circulation  by  more  than  fifty 
per  cent;  thereafter  the  proportion  of  deposits  to  notes 
increased. 

PEOFITS  EAENED  BY  THE  BEANCHES 

To  its  owners  the  institution  was  a  source  of  very  con- 
siderable profit.  Dividends  declared  by  the  branches  had 
first  to  receive  the  approval  of  the  Board  of  Directors  of 
the  State  Bank.  The  record  of  the  directors'  action  on  the 
proposed  dividends  enables  us  to  determine  the  amounts 
paid.  Dividends  were  allowed  semi-annually,  but  the  banks 
were  not  regular  in  their  payments.  Considerable  variation 
is  found  between  the  various  branches,  showing  that  mutual 
responsibility  for  notes  did  not  in  any  way  hamper  the  man- 
agers of  the  various  branches  in  making  profits  for  the 
stockholders.  Beginning  with  the  meeting  of  November  17, 
1859,  dividends  were  approved  as  shown  in  Table  II. 

In  addition  to  the  dividends  paid,  a  surplus  fund  was 
created  out  of  the  earnings.  During  the  consideration  of 
the  bill  by  the  Senate  various  attempts  were  made  to  require 
that  a  certain  proportion  of  the  earnings  be  set  aside  as  a 
permanent  surplus  fund.""^"^  No  action  was  taken  by  the  leg- 
islature, but  the  directors  ruled  that  before  declaring  the 
first  dividend  a  contingent  fund  of  one  per  cent  of  the  paid- 
up  capital  must  be  set  aside.  Later  this  surplus  require- 
ment was  raised  so  that  no  dividend  was  to  be  permitted 
unless  the  branch  had  a  clear  surplus  of  ten  per  cent  after 
declaring  the  dividend.  This  amount  was  soon  reduced, 
however,  to  five  per  cent.^^^  The  abstracts  of  the  state- 
ments as  published  by  the  Bank  do  not  show  this  surplus  as 
a  separate  item.  Accordingly  it  is  not  possible  to  determine 
the  exact  total  profit.  The  heavy  dividends  allowed  in  May, 
1865,  probably  represent  a  distribution  of  this  surplus  to  the 
stockholders.    For  some  branches  there  is  no  such  distri- 


122 


HISTORY    OF    BANKING    IN    IOWA 


o 

'^  i« 

o 

o 

•0 

o 

o 

o 

o 

o 

>>S 

CO 

IN 

IN 

lO 

IC 

lO 

(S    00 

s 

o 

1 

•1- 

^  ;3! 

O 

o 

O 

>0 

o 

« 

lo 

o 

o 

IN 

4- 

o 

>•  to 

>    00 

'"' 

'^ 

^ 

CO 

■* 

o  ^ 

:?; 

^ 

'^  ^ 

o 

lO 

o 

lO 

t^ 

© 

o 

o 

o 

o 

.    to 

1>>  00 

CO 

f-( 

'^ 

(N 

e^ 

l> 

cS   ^ 

"■< 

5 

^ 

<5 

1 

o 

"^  M 

o 

o 

o 

■o 

lO 

O 

o 

lO 

o 

o 

|X( 

12 

■^ 

^ 

(N 

w 

IN 

o 

^ 

(M 

o 

lO 

* 

« 

» 

"O 

* 

<< 

W 

1 

N 

•)- 

++ 

* 

< 
m 

>   00 

o 

o 

»o 

to 

lO 

IN 

o 

■* 

H 

o 

lO 

* 

>o 

iC 

lO 

a 

fc, 

d  2 

'"' 

O 
m 

§ 

W 

« 

K 

^   00 

t» 

o 

lO 

Q 

o  ^ 

IC 

o 

« 

10 

o 

© 

10 

* 

o 

tH 

!>>  00 

a 

S 

TjT 

too 

:^ 

<3 

*"*  O 

IN 

t^ 

o 

Oi 

o 

o 

05 

lO 

t^ 

o 

Oh 

i% 

^^ 

^ 

CO 

H 

-<  o 

Q 

■* 

K 

lO 

la 

o 

lO 

o 

lO 

>o 

> 

S   ^ 

P 

n" 

&• 

■^  Oi 

O 

>   00 

OO 

t^ 

to 

o 

lO 

•* 

to 

lO 

lO 

Eh 

O  rt 

^ 

■§ 

cc 

00 

00 

00 

00 

00 

w 

« 

o 

o 

0-. 

© 

o 

o 

■"^ 

> 
g 

Q 

Z; 

Irt 

lO 

•c 

>o 

>f5 

lO 

lO 

lO 

lO 

in 

o 

»0 

o 

o 

© 

fc    o 

00 

00 

00 

00 

00 

00 

00 

00 

00 

00 

00 

00 

00 

00 

M 

a 

« 

0  i. 

00 

'^ 

■^ 

'^ 

'"' 

'"' 

"^ 

'"' 

^ 

'"' 

"^ 

'^ 

"^ 

'^ 

■^ 

'^ 

H 

H    m 

;o" 

to 

to" 

to" 

to" 

to" 

to" 

©" 

t>." 

00 

oo" 

*-4 

lo" 

■*" 

o" 

0^ 

5  s 

'^ 

'^ 

"^ 

'^ 

^ 

o 

Q^ 

+^ 

■U3 

^ 

^ 

4^ 

^ 

^ 

■M 

^ 

si 

o 

Sf 

XJ 

t^ 

^ 

a 

o 

u 

o 

o 

o 

o 

y 

u 

o 

3 

aj 

o 

o 

•a 

C 

O 

O 

o 

o 

o 

O 

O 

&H 

<! 

ft, 

^ 

fa 

a 

2 

B 

b 

"> 

be 

o  w 

o 

« 
0 

en 
a 

S5 

» 

>> 

-< 

IS 

< 

2 

H 
H 

z 
o 

H 

0 

o 
z 

z 
o 

00 

K 
0 

5 
« 

S    5 

B. 

O 

u 

M 

m 

H 

O 

6 

o 

5 

O 

>j 

M 

<    « 

a; 

or 

O 

p 

<i 

<j 

o 

■< 
M 

z 

< 

H 

u 

O 

^« 

> 
-< 

bt 
0 

O 
00 

0 

o 

n 

00 

< 

^ 

H 

^ 

P3 

O 
O 

z 
& 
o 

or 

<! 

Q 

Q 

Q 

o 

w 

M 
^ 

§ 

O 

»J 

P9 

^ 

S 

O 

S 

THE  STATE  BANK  OF  IOWA  123 

bution  shown,  but  a  surplus  fund  must  have  existed  in  all 
cases.  The  directors  were  given  authority  over  the  prop- 
erty when  the  bank  note  obligation  was  met,  so  undoubtedly 
there  was  a  distribution  of  assets  either  in  the  form  of  cash 
or  of  additional  stock  in  the  national  bank  which  succeeded 
to  the  business.  Moreover,  the  carefully  guarded  store  of 
specie  was  worth  a  high  premium  over  its  book  value  when 
the  banks  closed  their  business  as  branches  of  the  State 
Bank  to  become  independent  institutions.  The  minute  book 
shows  that  on  July  27,  1865,  the  directors  of  the  Iowa  City 
branch  voted  to  allow  John  Connell  twenty  per  cent  pre- 
mium on  his  gold  deposit.^^^  As  a  matter  of  fact  the  gold 
premium  was  probably  greater  at  the  time,  for  the  lowest 
premium  in  1865  was  twenty-eight  and  five-tenths  per  cent 
and  the  highest  was  one  hundred  thirty-four  and  four-tenths 
per  cent.^*® 

EECAPITULATION  OF  THE  EECOED  OF  THE  BANK 

Through  the  perspective  of  more  than  half  a  century  the 
career  of  the  State  Bank  of  Iowa  appears  most  honorable. 
Its  legislative  founders  builded  sanely  and  well.  The  real 
credit  for  its  success,  however,  must  be  given  to  the  men 
who  ruled  its  policies  and  practices  throughout  its  existence. 
Its  life  history  included  the  entire  period  of  the  Civil  War. 
If  we  date  its  beginning  from  October  27, 1858,  when  the  di- 
rectors first  met  in  Iowa  City,  and  fix  its  closing  date  on 
November  22,  1865,  when  the  records  of  the  Bank  were 
closed  with  the  informal  meeting  in  Davenport,  the  period 
of  its  existence  was  seven  years  and  twenty-five  days.  But 
it  can  hardly  be  said  to  have  conducted  business  that  long, 
for  before  the  final  date  the  office  in  Iowa  City  was  closed 
and  the  branches  were  carrying  on  business  under  national 
charters. 

The  Bank's  success  might  be  measured  in  various  ways, 
but  among  the  most  important  three  may  be  mentioned:  its 


124  PIISTORY    OF    BANKING   IN   IOWA 

ability  to  make  satisfactory  returns  to  the  owners ;  its  serv- 
ice in  supplying  a  reliable  bank  currency;  and  its  skill  in 
avoiding  political  entanglements.  Evidence  of  success  in 
the  first  of  these  particulars  has  already  been  furnished  by 
the  dividend  record  of  the  institution.  Its  record  of  earn- 
ings compares  favorably  with  that  of  the  highly  successful 
State  banks  of  Indiana  and  Ohio,  and  furnishes  a  striking 
contrast  to  the  State-owned  State  Bank  of  Illinois,  which 
cost  the  State  treasury  about  half  a  million  dollars  in  addi- 
tion to  heavy  losses  by  individuals.^ ^^ 

In  estimating  the  ability  of  the  State  Bank  to  supply  a 
sound  bank  currency  the  period  during  which  the  Bank 
existed  must  be  considered.  A  study  of  the  mixed  and  de- 
preciated currency  of  that  day  emphasizes  the  importance 
of  a  uniform  bank  currency  always  redeemable  at  par  in 
legal  tender  funds.  The  notes* of  the  State  Bank  of  Iowa 
deserved  and  won  the  public  confidence  and  filled  an  im- 
portant place  in  the  circulating  medium  of  Iowa. 

A  third  test  for  a  bank  of  that  period  was  its  ability  to 
keep  out  of  politics.  The  Second  Bank  of  the  United  States 
had  been  a  political  football  for  nearly  ten  years.  The 
Miners'  Bank  of  Dubuque  was  the  center  of  a  political 
struggle  in  the  Territory  of  Iowa  throughout  its  stormy 
career.  Banks  in  neighboring  States  were  smirched  by  po- 
litical graft  and  corruption.  Even  the  State  Bank  of  In- 
diana was  unable  to  keep  out  of  politics ;  and  its  successor, 
the  Bank  of  the  State  of  Indiana,  chartered  in  1855,  was 
conceived  amid  graft  and  corruption.^^^  No  political  stain 
soils  the  record  of  the  State  Bank  of  Iowa. 

Its  services  to  the  public  and  to  the  State  in  the  hour  when 
the  soldiers  of  Iowa  were  arming  to  preserve  the  nation's 
unity  have  been  recounted.  To  a  splendid  business  record, 
it  thus  added  financial  service  to  the  State  in  the  time  of 
need.  In  the  words  of  its  able  President:  *'It  lived  and 
operated  to  benefit  and  to  bless,  and  it  died  to  give  place  to 


THE  STATE  BANK  OF  IOWA  125 

the  Nation's  favorite,  and  its  record  ought  to  be  an  inspira- 
tion and  a  benediction  in  the  world  of  commerce,  and  its 
history  a  beacon  star  in  the  firmament  of  honest  finan- 
ciering. "^^^ 


vn 

ESTABLISHMENT  OF  THE  PRESENT  BANKING 

SYSTEM 

When  the  State  Bank  of  Iowa  ended  its  career  and  its 
branches  became  a  part  of  the  national  system,  an  epoch  in 
Iowa  banking  history  was  closed.  All  State  laws  devised 
especially  to  regulate  banking  became  obsolete  when  the 
Federal  government  taxed  out  of  existence  the  notes  of 
State  banks.  There  are  many  banks  now  in  Iowa  which 
began  their  career  before  the  Civil  War,  but  with  a  very  few 
exceptions  they  were  formerly  either  private  banks  or 
branches  of  the  State  Bank.  The  exceptions  are  banks  in- 
corporated under  the  general  incorporation  law  to  carry  on 
a  banking  business,  not  involving  the  function  of  note  issue. 
The  Miners '  Bank  of  Dubuque  was  a  bank  of  issue ;  the  regu- 
lations in  the  free  banking  law  were  chiefly  to  protect  note 
holders ;  the  purpose  of  the  State  Bank  plan  was  to  unite  the 
branches  in  mutual  responsibility  for  the  notes  which  they 
had  issued. 

After  the  Federal  legislation  of  1865  became  effective, 
the  function  of  note  issue  was  entirely  given  over  to  the 
national  banks.  For  a  decade  State  legislation  gave  little 
special  recognition  to  banking.  Authorized  banking  in  Iowa 
was  centered  in  the  national  banking  system.  Moreover,  the 
national  banking  law  furnished  the  model  for  the  later  State 
legislation.  At  the  outset  some  of  its  supporters  expected 
the  national  system  to  attain  a  monopoly  of  banking,  and 
this  is  a  partial  explanation  for  the  failure  of  the  States 
generally,  Iowa  included,  to  provide  for  banking  under 
State  law.313 

126 


ESTABLISHMENT  OF  PRESENT  SYSTEM  127 

The  need  for  a  uniform  and  sound  system  of  note  issue 
had  long  been  felt  in  the  United  States.  Conditions  in  Iowa 
which  have  been  described  elsewhere  were  typical  of  the 
situation  in  the  entire  country.  Political  entanglements 
caused  the  death  of  the  Second  United  States  Bank  by  the 
close  of  the  year  1836.  Its  demise  was  followed  by  several 
unsuccessful  attempts  to  establish  a  third  United  States 
bank.  In  1846  the  Independent  Treasury  System  was  per- 
manently established  to  care  for  public  funds.  Note  issues 
were  fairly  uniform  in  quality,  while  the  first  and  second 
United  States  banks  were  in  existence  because  of  their  pol- 
icy of  discriminating  against  banks  which  did  not  redeem 
notes  promptly  in  specie.  Thereafter  examples  of  good  and 
bad  banking  are  to  be  found  in  different  States  at  the  same 
time  and  in  the  same  State  at  different  times.  On  the  whole, 
by  1860,  the  eastern  States  were  on  a  sound  basis,  while  the 
West  and  South,  with  a  few  notable  exceptions,  such  as 
during  the  period  of  the  State  Bank  of  Iowa,  were  still  pass- 
ing through  a  period  of  ** wild  cat"  banking. 

OEIGIN  OF  THE  NATIONAL  BANKING  SYSTEM 

Exigencies  of  war  brought  the  next  national  reform  in 
banking.  In  the  necessity  of  the  times  the  national  banking 
system  had  its  birth.  In  1861  Salmon  P.  Chase,  formerly 
Governor  of  Ohio,  became  Secretary  of  the  Treasury.  In 
his  finance  report  for  1861  Secretary  Chase  presented  to 
Congress  the  advantages  to  be  derived  from  a  national  cur- 
rency. His  hope  was  pinned  to  a  system  which  would  make 
use  of  the  existing  banking  institutions  on  a  voluntary 
basis.^^^ 

The  germ  of  the  national  bank  idea  is  to  be  found  in  the 
free  banking  system  first  adopted  in  New  York  in  1838. 
This  provided  for  a  system  of  local  banks  each  authorized 
to  issue  notes  secured  by  the  deposit  of  State  securities. 
The  fundamental  idea  of  the  national  banking  system  was 


128  HISTORY   OF    BANKING    IN   IOWA 

the  same,  except  that  national  securities  were  to  be  used  as 
the  basis  of  circulation.  This  would,  it  was  thought,  achieve 
two  main  purposes :  provide  a  uniform  and  sound  currency, 
and  create  a  market  for  government  bonds. 

Abundant  evidence  may  be  found  of  the  demand  for 
uniformity  in  the  currency.  An  article  "By  a  Western 
Banker"  in  Hunt's  Merchants'  Magazine  for  January,  1863, 
describes  the  situation  very  well : 

In  the  West  the  people  have  suffered  for  years  from  the  issues  of 
almost  every  State  in  the  Union,  much  of  which  is  so  irredeemable, 
so  insecure,  so  unpopular,  as  to  be  known  by  opprobrious  names 
rather  than  the  money  it  pretends  to  represent.  There  the  fre- 
quently worthless  issues  of  the  State  of  Maine  and  of  other  New 
England  States,  the  shinplasters  of  Michigan,  the  wild  cats  of 
Georgia,  of  Canada,  and  Pennsylvania,  the  red  dogs  of  Indiana  and 
Nebraska,  the  miserably  engraved  notes  of  North  Carolina,  Ken- 
tucky, Missouri,  and  Virginia,  and  the  not-to-be-forgotten  stump- 
tails  of  Illinois  and  Wisconsin  are  mixed  indiscriminately  with  the 
par  currency  of  New  York  and  Boston,  until  no  one  can  wonder 
that  the  West  has  become  disgusted  with  all  bank  issues  and  almost 
unanimously  demand  that  such  a  currency  shall  be  taxed  out  of 
existence,  and  give  place  to  a  uniform  national  currency.^^^ 

Not  only  was  there  want  of  uniformity  of  notes  as  origin- 
ally issued,  but  alterations  and  counterfeits  added  to  the 
confusion.  Dewey  says  regarding  the  then  existing  condi- 
tions: "All  told,  about  7000  different  kinds  of  notes  circu- 
lated, to  say  nothing  of  successful  counterfeits.  Over  3000 
varieties  of  altered  notes  were  afloat,  1700  of  spurious  notes, 
and  over  800  varieties  of  imitations,  making  more  than  5500 
varieties  of  fraudulent  notes  ....  In  1862,  only  253  banks 
issued  notes  which  had  not  been  altered  or  imitated.  "^^^ 

Although  the  plan  of  Secretary  Chase  received  little  sup- 
port in  Congress  in  1861,  he  renewed  the  proposal  in  his 
second  annual  report  in  December,  1862.  At  that  time  he 
asserted  that  the  bonds  needed  as  security  for  circulation 


ESTABLISHMENT  OF  PRESENT  SYSTEM  129 

would  amount  to  $250,000,000.  Pointing  out  the  advantage 
to  be  gained  from  a  considerable  and  continuous  market  for 
bonds  as  a  further  argument  for  the  proposed  system  of 
national  banks,  he  urged  also  the  advantage  of  having  a 
system  of  government  supervised  banks  as  depositories  for 
the  public  money  then  being  collected  under  the  internal 
revenue  law  of  July  1, 1862. 

Secretary  Chase  had  the  support  of  President  Lincoln 
and  his  cabinet,  but  found  it  difficult  to  get  influential  back- 
ing in  Congress.  The  support  of  Senator  John  Sherman 
was  probably  most  effective  in  securing  the  passage  of  the 
measure  which  was  approved  by  the  President  on  February 
25, 1863.  This  law  was  repealed  and  a  new  measure  enacted 
on  June  3,  1864.  In  its  essential  features  this  legislation 
persisted  as  the  legal  basis  for  the  national  banking  system 
until  the  passage  of  the  Federal  Eeserve  Act.^^^ 

The  most  important  features  of  the  national  bank  act  as 
amended  in  June,  1864,  are  easily  described.  There  was 
established  in  the  Treasury  Department  a  separate  bureau 
which  should  have  charge  of  the  issue  and  regulation  of  the 
national  currency,  the  chief  officer  of  which  was  designated 
the  Comptroller  of  the  Currency.  Banking  associations 
might  be  formed  by  not  less  than  five  persons  uniting  to 
form  an  organization.  The  minimum  amount  of  capital  was 
fixed  at  $50,000  for  places  of  less  than  6000  population, 
$100,000  for  places  not  exceeding  50,000  population,  and 
$200,000  for  all  other  cities. 

Banking  associations  were  chartered  for  twenty  years. 
They  were  permitted  to  discount  and  negotiate  promissory 
notes,  drafts,  bills  of  exchange,  and  other  evidences  of  debt, 
to  receive  deposits,  deal  in  coin,  bullion,  and  exchange,  make 
loans  on  personal  security,  and  issue  notes  for  circulation. 
Banks  were  not  permitted  to  hold  real  estate  except  such  as 
was  necessary  for  the  transaction  of  their  business  or  such 
as  was  taken  in  good  faith  in  collecting  a  debt.    The  latter 


130  HISTORY   OF    BANKING   IN    IOWA 

could  not  be  held  for  more  than  five  years.  Investment  in 
real  estate  mortgages  was  also  forbidden. 

Banks  were  forbidden  to  make  loans  on  the  security  of  the 
shares  of  their  capital  stock.  No  person  or  firm  was  to  be 
permitted  to  become  indebted  to  the  banking  association  for 
a  sum  in  excess  of  ten  per  cent  of  the  capital,  except  for 
bona  fide  discount  or  purchase  of  bills  receivable. 

Each  bank  was  required  to  deposit  in  the  office  of  the 
Treasurer  of  the  United  States  interest-bearing  bonds  of  the 
United  States  to  an  amount  not  less  than  $30,000  nor  less 
than  one-third  of  the  capital  stock,  which  were  to  be  held 
to  secure  circulation.  Notes  of  denominations  from  $1  to 
$1000  might  be  issued  to  the  extent  of  ninety  per  cent  of 
the  value  of  the  bonds  deposited.  The  aggregate  volume  of 
national  bank  notes  was  limited  to  $300,000,000.^^^ 

ESTABLISHMENT  OF  NATIONAL  BANKS  IN  IOWA 

The  First  National  Bank  of  Davenport,  Iowa,  has  the 
honor  of  being  the  first  national  bank  in  the  United  States 
to  begin  business  under  the  new  law.  Application  for  its 
charter  reached  Washington  on  February  26,  1863,  one  day 
after  the  bill  was  approved  by  the  President.  The  bank  was 
No.  15  on  the  list  officially  acted  upon  by  the  Department  on 
June  22nd  and  it  retained  this  number  until  it  was  rechar- 
tered  in  1882.  Pending  official  approval,  books  had  been 
opened  for  subscriptions  to  shares  on  May  25th.  In  three 
days  the  entire  $100,000  were  subscribed.  On  Monday,  June 
29,  1863,  the  bank  opened  its  doors  for  business,  t^vo  days 
before  any  other  national  bank  in  the  United  States.  Its 
deposits  on  that  date  were  $80,506.93.  Its  first  installment 
of  notes  amounting  to  $26,000  was  received  on  January  21, 
1864.  These  notes  were  the  second  lot  to  be  engraved,  those 
of  the  First  National  Bank  of  Washington,  D.  C,  being  the 
first.  The  bank  occupied  the  ''Marble  Bank"  building 
erected  in  1857  by  Cook  and  Sargent.    A  new  building  has 


ESTABLISHMENT  OF  PRESENT  SYSTEM     131 

been  built  and  the  bank's  charter  has  been  renewed,  but  the 
bank  still  continues  to  do  business  on  the  original  site.^^^ 
Other  national  banks  were  soon  established  in  Iowa.  The 
First  National  Bank  of  Iowa  City  was  opened  for  business 
on  July  13,  1863.  It  was  established  with  a  capital  of 
$50,000  subscribed  in  three  days.  In  pointing  out  the  advan- 
tages of  the  new  system  a  local  newspaper  called  attention 
to  the  safety  of  the  note  issues  because  ''a  dollar  and  eleven 
cents"  of  United  States  bonds  were  to  be  held  for  every 
dollar  of  circulation,  in  addition  to  which  there  were  the 
assets  of  the  bank  and  the  double  liability  of  stockholders. 
Uniformity  of  the  currency  was  also  emphasized  as  a  prized 
boon.  The  first  installment  of  notes  actually  appeared  sev- 
eral months  later.  In  commenting  on  these  new  notes  the 
same  newspaper  said:  "The  Public  have  long  waited  for 
the  appearance  of  this  currency  which  is  beautiful  as  a  work 

of  art,  and  will  soon  become  as  familiar  as  the  old  Green- 
backs. "^  20 

The  third  national  bank  in  Iowa  was  opened  for  business 
on  August  17,  1863,  at  Lyons  City.  It  changed  hands  on 
January  4,  1864,  and  was  later  merged  with  the  branch  of 
the  State  Bank  of  Iowa  of  that  place.  These  three  banks 
were  the  only  ones  that  had  actually  commenced  business  by 
October  1,  1863,  the  date  when  the  Comptroller  secured  the 
first  quarterly  reports  from  the  banks.  Three  other  banks 
had  been  granted  charters  before  December  1,  1863 ;  and  by 
October  1,  1864,  there  were  twenty  national  banks  in  Iowa. 
In  1866  this  number  had  grown  to  forty-five,  but  it  was  not 
further  increased  until  1871.^^^ 

During  the  early  life  of  the  national  system  it  seems  to 
have  been  most  readily  accepted  in  the  western  States  where 
the  size  of  the  banks  was  small.  Secretary  Chase,  who  had 
expected  a  large  number  of  existing  banks  to  enter  the  sys- 
tem, was  disappointed  in  the  number  and  especially  in  the 
size  of  these  banks.    A  committee  of  the  New  York  Clearing 


132  HISTORY    OF    BANKING    IN    IOWA 

House  in  November,  1863,  maintained  that  a  considerable 
number  of  banks  had  joined,  but  that  they  were  small  banks 
of  $50,000  or  $60,000  capital.  This  committee  went  so  far 
as  to  charge  that  many  of  these  banks  were  banks  of  circu- 
lation only,  of  the  familiar  "wild  cat"  type — not  regular 
banks  of  deposit  and  discount.^ ^^  The  Iowa  banks  were 
small  because  conditions  in  Iowa  did  not  then  warrant  large 
banks,  but  they  were  unquestionably  banks  of  deposit  and 
discount  as  well  as  of  circulation.  As  evidence  of  their 
soundness  it  may  be  stated  that  during  the  first  ten  years  of 
the  history  of  national  banking  in  Iowa,  only  one  failure  is 
recorded.^  2^ 

Incomplete  records  of  the  First  National  Bank  of  Iowa 
City  indicate  that  Iowa  banks  did  their  share  toward  realiz- 
ing the  hope  of  the  founders  of  the  national  system  that  the 
banks  would  assist  in  selling  bonds  to  the  public.  During 
the  first  six  months  of  1865  this  bank  alone  sold  over  a  half 
million  dollars'  worth  of  the  seven-thirty  notes — so-called 
from  the  interest  rate.  The  local  newspaper  in  commenting 
on  the  loyalty  of  the  community  in  taking  the  loan  also  com- 
mended the  ** persevering  effort"  upon  the  part  of  the  bank 
in  introducing  it.  The  First  National  Bank  of  Davenport 
also  pushed  the  sale  of  government  securities.  On  May  28, 
1864,  its  officers  forwarded  a  remittance  of  $200,000  as 
proceeds  of  the  sale  of  government  bonds.^^^  This  first  in- 
stallment was  the  result  of  only  a  few  months  of  operation. 

PEIVATE  BANKING 

Aside  from  the  national  banks,  the  only  banks  in  Iowa 
during  this  period  were  private,  unincorporated  institutions 
and  a  few  banks  incorporated  under  the  general  incorpora- 
tion laws  of  the  State.  Neither  of  these  types  was  subject 
to  any  special  regulation.  The  private  banks  were  much 
more  numerous  than  any  other  class.  Since  they  were  not 
required  to  make  any  reports  and  were  unincorporated  in- 


ESTABLISHMENT  OF  PRESENT  SYSTEM     133 

stitutions,  there  are  no  entirely  satisfactory  and  reliable  sta- 
tistics concerning  the  number  and  resources  of  these  insti- 
tutions. The  laws  of  the  United  States  required  that  re- 
turns be  made  to  th«.  Commissioner  of  Internal  Revenue,  for 
purposes  of  taxation,  of  the  capital  and  deposits  of  all  banks 
whether  authorized  or  private  institutions.  In  1876  the 
Comptroller  of  the  Currency  compiled  and  published  a 
study  of  banking  in  the  United  States,  obtaining  data  from 
the  Commissioner  of  Internal  Revenue  concerning  other 
than  national  banks.  His  tables  group  together  State  banks, 
savings  banks,  trust  companies,  and  private  banks.  The 
data  given  are  for  the  six  months  ending  November  30, 1875. 

Iowa  is  credited  with  241  State,  savings,  and  private  banks 
having  capital  of  $4,223,639  and  deposits  of  $9,484,568.^^5 
The  State  Auditor's  report  for  1875  gives  a  total  of  nineteen 
savings  banks  and  twenty- three  State  banks.^^^  Although 
the  dates  of  the  two  reports  are  not  identical  they  fall  suffi- 
ciently close  together  for  purposes  of  rough  comparison. 
Deducting  the  forty- two  State  chartered  banks  from  the 
Comptroller's  total  of  241  gives  us  virtually  200  private 
banks  in  Iowa  in  1875.  Romans'  Bankers  Almanac  gives 
a  total  of  201  in  1877.^^^  The  approximate  agreement  of 
these  figures  taken  from  independent  sources  is  fairly  good 
evidence  that  the  number  200  is  nearly  correct. 

The  roots  of  these  private  banks  go  back  to  the  period 
before  the  establishment  of  the  State  Bank  of  Iowa.  The 
attempt  to  prohibit  banks  had  resulted  in  the  formation  of 
a  large  number  of  unauthorized  firms  to  carry  on  banking 
business.  Although  denied  the  right  of  note  issue,  business 
men  had  found  it  profitable  to  maintain  banks  to  exercise 
the  other  functions  of  a  commercial  bank.  The  panic  of 
1857  had  swept  many  of  these  institutions  out  of  existence, 
but  others  took  their  places.  The  terms  of  the  free  banking 
law  of  1858  had  not  appealed  to  them  and  none  sought  char- 
ters under  its  provisions.    Branches  of  the  State  Bank  were 


134  HISTORY    OF    BANKING    IN    IOWA 

denied  to  several  private  institutions  which  sought  to  be 
admitted. 

Most  of  the  branches  of  the  State  Bank  and  many  new 
associations  were  attracted  by  the  national  banking  system. 
The  national  banks  enjoyed  superior  credit  in  the  minds  of 
most  people,  hence  there  were  advantages  in  incorporating 
under  that  system.  On  the  other  hand,  there  were  certain 
disadvantages  which  operated  to  prevent  the  conversion  of 
existing  institutions  into  national  banks. 

Chief  among  the  disadvantages  was  the  high  minimum 
capital  required  of  national  banks.  Under  the  national 
banking  law  before  1900,  the  smallest  capital  permitted  was 
$50,000 ;  whereas  most  of  the  communities  where  banks  were 
needed  to  furnish  credit  were  small,  chiefly  agricultural,  and 
could  not  provide  so  much  capital.^  ^^  A  second  important 
obstacle  to  the  growth  of  the  national  system  was  the  ina- 
bility to  loan  on  real  estate  security.  In  Iowa  considerable 
money  was  of  necessity  loaned  to  the  farmer  whose  best 
security  was  his  land.  This  disability  was  not  removed  until 
the  passage  of  the  Federal  Eeserve  Act  in  1913.  The  private 
and  State  bankers  have  therefore  been  freer  in  this  respect 
than  the  national  banker. 

Among  bankers,  as  among  other  business  men,  there  has 
existed  a  desire  to  be  free  from  supervision  and  restraint. 
Grradually  there  had  been  forced  upon  the  bankers  a  recog- 
nition of  the  necessity  for  public  regulation  of  note  issue. 
But  they  were  unwilling  to  submit  to  control  where  the 
operations  were  chiefly  discount  and  deposit.  Profitable  as 
the  right  to  issue  notes  was  during  the  first  two  decades  of 
the  national  banking  system,  there  is  no  doubt  that  many 
bankers  were  willing  to  forego  this  source  of  profit  in  order 
to  be  able  to  conduct  their  own  business  free  from  govern- 
ment supervision.  It  is  probably  true  that  in  proportion 
to  capital  employed,  private  banks  were  no  less  profitable 
than  national  banks.    Probably  there  was  also  a  fear  on  the 


ESTABLISHMENT  OF  PRESENT  SYSTEM  135 

part  of  private  bankers  that  taxation  would  be  heavier  if 
they  were  incorporated.  Certain  it  is  that  such  a  reason 
was  urged  later  by  private  bankers  against  compulsory 
incorporation. 

STATE  BANKS 

In  earlier  years  the  right  of  note  issue  had  been  regarded 
as  a  very  valuable  privilege  of  the  banker.  Banking  meth- 
ods, however,  were  changing  by  the  mid-nineteenth  century 
so  that  banks  were  no  longer  dependent  on  note  issue  as  a 
source  of  profit.  The  expectation,  therefore,  that  existing 
State  or  private  institutions  would  be  forced  into  the  na- 
tional system  or  out  of  the  banking  business  was  not  fully 
realized.  In  1860  there  were  1562  State  banks  in  the  United 
States.  As  a  result  of  the  repressive  influence  of  the  Na- 
tional Bank  Act,  this  number  was  reduced  to  247  by  1868. 
State  banking  laws  were  generally  repealed,  or  rendered 
obsolete  by  the  fact  that  most  of  them  were  intended  to  regu- 
late banks  of  issue.^^^  The  general  or  free  banking  law  of 
1858 — never  used  and  now  obsolete — was  repealed  by  the 
General  Assembly  of  Iowa  in  March,  1870.^^°  For  five  years 
the  State  Bank  of  Iowa  had  been  out  of  existence. 

In  1860  a  law  was  passed  which  required  that  all  banking 
associations  incorporated  under  the  general  incorporation 
laws  of  the  State  make  regular  quarterly  reports  of  their 
condition  to  the  Auditor  of  State,^^^  but  no  other  laws  were 
enacted  to  provide  a  system  of  State  banks,  and  so  private 
banks  flourished  unregulated  where  the  national  banks  were 
not  adapted  to  the  local  conditions.  In  this  respect  Iowa 
was  not  more  backward  than  other  States.  Even  as  late  as 
1892  there  was  scarcely  any  State  banking  legislation.  In 
a  digest  of  State  statute  law,  Mr.  Stimson  said :  ' '  It  seems 
unnecessary  to  incorporate  the  state  banking  laws  in  this 
edition.  Nearly  all  the  States,  except  the  newer  States  and 
Territories,  have  special  chapters  in  their  corporation  acts 


136  HISTORY   OF   BANKING   IN   IOWA 

concerning  banks  and  moneyed  institutions,  but  these  chap- 
ters are  usually  of  old  date,  and  have  practically  been  super- 
seded for  so  long  a  time  by  the  national  banking  laws  that 
they  have  become  obsolete  in  use  and  form.  "^^^ 

The  law  of  1860  requiring  that  reports  be  made  by  State 
incorporated  banks  seems  to  have  been  largely  ineffective. 
No  reports  were  published  by  the  Auditor — if,  indeed,  any 
were  received.^^-^  Before  1870  corporations  were  permitted 
to  file  their  articles  of  incorporation  with  the  county  re- 
corders. Since  banks  were  subject  only  to  the  general  in- 
corporation laws  they  were  not  required  to  secure  a  certifi- 
cate from  the  Auditor  or  any  other  State  official  before 
commencing  business.  Complete  data  concerning  banks  in- 
corporated under  these  conditions  is  not  available,  but 
partial  records  show  that  banks  were  incorporated  under 
the  general  law  even  before  the  revision  of  the  Constitution 
in  1857.  The  Des  Moines  County  Savings  Bank,  incorpo- 
rated at  Burlington  in  1856,  the  Merchants  Insurance  Com- 
pany and  Burlington  Savings  Bank,  incorporated  on  April 
24, 1857,^^'^  the  Davenport  Savings  Institution,  organized  on 
January  25,  1864,  as  an  auxiliary  of  the  First  National 
Bank  of  that  place,^^^  the  Keokuk  Savings  Bank,  incorpo- 
rated on  December  19,  1867,^^®  and  the  German  Savings 
Bank  of  Davenport,  dating  from  April  1, 1869,^^^  are  exam- 
ples of  early  banks  seeking  State  incorporation. 

In  1870  an  amendment  to  the  general  incorporation  law 
required  the  filing  of  articles  of  incorporation  in  the  office 
of  the  Secretary  of  State  within  three  months  after  the  law 
went  into  effect.^^^  But  even  after  the  passage  of  this 
amendment  the  banks  did  not  all  comply  with  the  law.  Such 
records  as  are  held  by  the  Secretary  of  State  show  that  five 
banks  were  incorporated  in  1870,  nine  in  1871,  ten  in  1872, 
and  twenty  in  1873 — a  total  of  forty-four.^s^  According  to 
the  Auditor's  testimony,  a  considerable  number  of  banks 
existed,  incorporated  under  the  law  before  the  amendment 


ESTABLISHMENT  OF  PRESENT  SYSTEM  137 

of  1870,  whose  articles  were  not  recorded.  He  treated  all 
such  as  not  incorporated  and  refused  to  recommend  the  ap- 
pointment of  receivers  for  those  that  failed.  In  1873  in- 
corporated banks  were  required  to  make  reports  to  the 
Auditor  of  State,  but  he  called  for  statements  only  from 
those  whose  articles  were  recorded  with  the  Secretary  of 
State.  Twenty-three  banks — fifteen  savings  and  eight  State 
banks — reported  on  September  26,  1873.  The  panic  of 
1873  had  swept  some  banks  out  of  existence,  but  incomplete 
records,  quite  as  much  as  liquidations,  account  for  the 
smaller  number.  Two  years  later  the  first  satisfactory  sta- 
tistics of  State  incorporated  banks  were  secured.  At  that 
time  forty-two  banks — nineteen  savings  and  twenty-three 
State  banks — made  reports.^ ^" 

The  Code  of  1873  contains  the  first  effective  regulations 
concerning  State  banks.  In  it  the  provisions  of  the  law  of 
1860  specifying  that  quarterly  reports  should  be  made  to 
the  Auditor  were  reenacted,  with  the  amendment  that,  in- 
stead of  the  report  being  due  on  certain  specified  dates,  the 
Auditor  was  required  to  call  for  a  statement  as  shown  by  the 
books  of  account  upon  some  specified  past  day.  The  Audi- 
tor was  also  authorized  to  make,  or  cause  to  be  made,  an 
examination  of  any  banking  association  operating  under  the 
general  incorporation  law.  The  minimum  amount  of  paid- 
up  capital  allowed  for  State  incorporated  banks  was  fixed 
at  $25,000  for  banks  in  towns  having  a  population  not  ex- 
ceeding 3000  and  $50,000  for  banks  in  all  other  towns  or 
cities.  It  was  the  duty  of  the  Auditor  to  see  that  this  capital 
requirement  was  fully  met  before  issuing  a  certificate  to  the 
stockholders  of  a  bank  authorizing  them  to  commence  busi- 
ness. Without  such  a  certificate  no  State  incorporated  bank 
could  legally  carry  on  its  business.  The  Auditor  was  also 
charged  with  the  duty  of  notifying  the  Attorney  General 
whenever  he  was  satisfied  that  a  bank  was  insolvent,  which 
was  then  to  be  placed  in  the  hands  of  a  receiver  and  its 


138  HISTORY    OF    BANKING    IN    IOWA 

affairs  wound  up.  In  settling  its  obligations  the  depositors 
were  to  be  regarded  as  preferred  creditors.  These  pro- 
visions of  the  Code  of  1873,  with  revisions  and  amendments, 
remain  as  the  basis  for  regulation  of  State  banks  in  Iowa  up 
to  the  present  time.^'*^ 

THE  SAVINGS  BANK  LAW  OF  1874 

Even  before  the  enactment  of  the  Code  of  1873,  the  pro- 
visions of  which  applied  to  savings  banks  also,  Governor 
Samuel  Merrill  in  his  second  biennial  message  of  January 
10,  1872,  recommended  that  laws  be  passed  regulating  sav- 
ings banks.^^-  His  successor,  Grovernor  Cyrus  C.  Carpenter, 
called  attention  to  the  fact  that  the  provisions  as  set  forth 
in  the  Code  did  not  meet  the  requirements  of  a  sound  sav- 
ings bank  law.  He  made  certain  recommendations  and 
urged  the  legislature  to  act  on  the  matter.^"*^  The  Fifteenth 
General  Assembly  passed  the  needed  legislation  and  thus, 
on  March  21,  1874,  established  the  savings  bank  system  of 
Iowa. 

Under  the  terms  of  the  law  of  1874  five  or  more  persons 
were  permitted  to  incorporate  under  the  general  incorpora- 
tion laws  for  the  purpose  of  establishing  a  savings  bank. 
Detailed  instructions  were  laid  down  according  to  which 
existing  savings  banks  were  required  to  reorganize  so  as  to 
conform  before  July  1,  1875,  to  the  provisions  of  the  act. 
The  articles  of  incorporation  were  to  be  filed  in  the  county 
recorder's  office  and  a  certified  copy  deposited  in  the  office 
of  the  Secretary  of  State.  Incorporation  could  be  for  a 
maximum  of  fifty  years ;  and  the  ordinary  powers  of  a  cor- 
poration were  vested  in  these  banks. 

The  minimum  amount  of  capital  was  fixed  at  $10,000  in 
towns  of  less  than  10,000  population  and  $50,000  in  larger 
towns.  Shares  of  stock  could  not  be  issued  until  certified 
by  the  Auditor  as  fully  paid.  If  the  Auditor  deemed  it  neces- 
sary he  was  authorized  to  make  a  personal  examination  of 


ESTABLISHMENT  OF  PRESENT  SYSTEM  139 

the  bank  and  its  condition  before  granting  the  right  to 
begin  business.  Shares  must  be  $100  each.  Double  liability 
for  shareholders  was  prescribed,  and  the  liability  of  a  share- 
holder was  not  affected  if  the  bank  became  insolvent  within 
six  months  after  the  transfer  of  the  shares  on  the  books  of 
the  corporation.  In  any  case  where  it  was  desired  to  in- 
crease the  capital  stock,  two-thirds  of  all  the  stockholders 
must  favor  the  increase. 

Control  of  each  of  the  banks  was  vested  in  a  board  of 
from  five  to  nine  directors  or  trustees,  elected  annually  by 
the  stockholders  from  among  their  own  number.  Citizen- 
ship in  the  State  and  bona  fide  ownership  of  the  stock  stand- 
ing in  their  names  on  the  books  of  the  bank  were  qualifica- 
tions for  directors,  and  they  were  not  to  receive  any  pay  for 
their  services.  In  the  selection  of  directors  the  share- 
holders were  to  vote  at  the  ratio  of  one  share  one  vote, 
proxies  being  allowed.  The  directors  had  power  to  choose 
the  officials  and  to  appoint  the  cashier  and  the  subordinate 
clerks  and  helpers. 

The  deposits  which  the  bank  might  receive  were  limited 
by  law  to  ten  times  the  paid-up  capital  of  the  bank — that  is, 
a  bank  with  the  minimum  capital  of  $10,000  was  restricted 
to  a  maximum  of  $100,000  deposits.  The  capital  was  to  be 
regarded  as  a  guarantee  fund  for  the  better  security  of  the 
depositors.  In  view  of  the  fact  that  the  investments  of  a 
savings  bank  are  presumably  not  so  liquid  as  those  of  a 
commercial  bank,  the  banks  were  given  the  power  to  require 
sixty  days'  written  notice  of  withdrawal  of  deposits.  This 
requirement  might  be  waived  at  any  time  at  the  discretion  of 
the  directors.  In  practice  it  has  been  exercised  only  on  such 
occasions  as  the  panic  of  1907.  Banks  desiring  to  stop  in- 
terest on  any  deposit  might  do  so  by  sending  notice  to  the 
depositor  to  close  his  account.  An  account  left  ten  years 
without  addition  or  withdrawal  was  closed  automatically, 
except  in  case  of  endowment  for  children  or  trust  estates 


140  HISTORY    OF    BANKING    IN    IOWA 

where  special  provision  had  been  made.  Banks  might 
also  issue  certificates  of  deposit  payable  on  demand.  The  in- 
terest to  be  paid  was  left  to  the  regulation  of  the  directors. 
Before  paying  any  dividend  the  directors  were  required  to 
set  aside  enough  of  the  earnings  to  pay  interest  to  the 
depositors  and  all  expenses  of  the  bank.  No  surplus  was 
prescribed,  nor  was  there  any  limit  set  to  the  amount  of 
dividend  that  might  be  paid. 

The  investment  of  the  funds  of  savings  banks  was  limited 
as  follows : 

1.  Stocks  or  bonds  or  interest-bearing  notes  or  certifi- 
cates of  the  United  States. 

2.  Stocks  or  bonds  or  evidences  of  debt  bearing  interest, 
of  this  State. 

3.  Stocks,  bonds,  or  warrants  of  any  city,  town,  county 
or  school-district  of  the  State.  Not  over  twenty-five  per 
cent  of  the  assets  of  any  bank  could  be  of  this  class. 

4.  Real  estate  mortgages  upon  unincumbered  Iowa  land 
worth  at  least  twice  the  amount  loaned  thereon. 

5.  Commercial  paper,  notes,  bills  of  exchange,  drafts, 
or  other  personal  or  public  security.  Loans  on,  or  pur- 
chase of,  its  own  stock  was,  however,  strictly  forbidden. 

6.  In  the  case  of  real  estate  loans  all  expenses  must  be 
paid  by  the  borrower.  In  case  buildings  were  included  in 
the  valuation,  insurance  must  be  provided  by  the  borrower 
for  the  protection  of  the  bank. 

In  its  permanent  ownership  of  land  the  bank  was  limited 
to  the  lot  and  building  in  which  the  business  of  the  bank 
was  carried  on.  Other  real  estate  could  be  purchased  at 
sales  upon  foreclosure  of  mortgage  owned  by  the  bank  or 
upon  judgment  for  debts  due.  Land  so  acquired  must  be 
sold  within  ten  years  after  acquisition.  The  limitation  on 
loans  to  any  one  person  or  firm  was  fixed  at  ten  per  cent  of 
the  paid-up  capital.  In  computing  the  money  borrowed, 
however,  it  was  provided  that  the  discount  of  bills  of  ex- 


ESTABLISHMENT  OF  PRESENT  SYSTEM  141 

change,  drawn  against  actually  existing  values,  and  the  dis- 
count of  commercial  or  business  paper  actually  owned  by 
the  persons  or  firm  negotiating  the  same,  should  not  be 
included. 

Supervision  of  savings  banks  was  placed  with  the  Auditor 
of  State,  who  was  authorized  to  certify  to  the  articles  of 
incorporation,  call  for  statements,  make  examinations,  and 
report  to  the  General  Assembly  with  recommendations. 
Quarterly  statements  of  condition  were  to  be  made  to  him 
also.  These  were  to  be  made  on  some  past  date  designated 
by  the  Auditor. 

The  Auditor  was  empowered  to  make,  or  cause  to  be  made, 
an  examination  of  any  banking  association  conducting  busi- 
ness under  the  act.  He  was  authorized  to  appoint  examiners 
with  power  to  administer  oaths  and  compel  the  attendance 
of  witnesses  in  the  same  manner  as  authorized  in  the  State 
courts.  Banks  were  required  to  produce  necessary  books 
and  papers  for  the  examiner,  and  the  expense  of  examina- 
tion was  to  be  borne  by  the  bank,  the  amount  being  fixed  by 
the  Auditor.  Heavy  penalties  were  prescribed  for  making 
false  entries  or  statements.  The  duty  of  the  Auditor  in 
cases  where  he  considered  the  bank  unsafe  consisted  in  noti- 
fying the  bank  to  discontinue  its  unsafe  practices  and  con- 
form to  the  law.  In  case  of  refusal  he  must  report  to  the 
Attorney  General,  who  would  institute  proceedings  under 
the  law  relating  to  insolvent  incorporations. 

The  use  of  the  word  ''savings"  in  the  title  of  any  banking 
association  or  private  bank  not  under  the  act  was  strictly 
forbidden ;  and  the  prohibition  included  its  use  in  any  sign, 
advertisement,  card,  circular,  or  any  other  similar  method 
of  displaying  the  word.^^^ 

The  Auditor  of  State  was  required  to  report  the  condition 
of  savings  banks  at  every  regular  meeting  of  the  General 
Assembly.  In  his  report  of  1875,  where  nineteen  savings 
banks  are  enumerated,^ *^  is  to  be  found  the  first  official 


142  HISTORY    OF    BANKING    IN    IOWA 

record  of  banks  incorporated  under  the  savings  bank  law. 
From  that  date  to  the  present,  reliable  statistics  of  savings 
banks  are  available.  Although  the  law  of  1874  has  been 
amended  from  time  to  time  it  still  retains  most  of  its  orig- 
inal features. 


VIII 

DEVELOPMENT  OF  BANKING 

1875-1921 

Amendments  to  the  national  banking  act  which  came  early 
in  1875  broadened  the  scope  and  increased  the  power  of 
national  banks.^^*^  The  Code  of  1873  defined  and  regulated 
State  banks.  By  1875  all  of  the  savings  banks  had  reorgan- 
ized to  conform  to  the  law  passed  in  1874.  The  State  Audi- 
tor reported  in  1875  that  both  classes  of  State  regulated 
banks  were  making  regular  reports  of  their  condition.^  ^'^ 
Private  banks  remained  unregulated;  but,  since  the  same 
condition  has  continued  down  to  the  present,  data  regarding 
them  are  only  approximate  for  any  period.  Certain  fairly 
reliable  and  continuous  statistics  beginning  about  1875  are 
available  and  satisfactory  for  comparative  purposes.  Sepa- 
rate data  on  loan  and  trust  companies  are  not  available  until 
a  considerably  later  period.  On  the  whole,  however,  the 
year  1875  may  be  chosen  as  marking  the  beginning  of  the 
present  system  of  general  banking  in  Iowa.  Changes  and 
amendments  have  taken  place  in  national  and  State  law,  but 
with  the  exception  of  loan  and  trust  companies  no  new  type 
of  general  bank  has  been  recognized. 

NATIONAL  BANKS 

The  amendment  of  the  national  banking  law  of  1875 
brought  about  what  may  be  termed  "free  banking"  under 
the  national  system.  The  volume  of  national  bank  notes 
under  the  act  of  1864  had  been  limited  to  $300,000,000.  This 
was  apportioned  to  the  States,  one-half  on  the  basis  of  popu- 
lation and  the  other  half  ' '  with  due  regard  to  banking  capi- 
tal, resources,  and  business."     This  limit  on  circulation 

143 


144  HISTORY   OF   BANKING   IN   IOWA 

being  soon  reached,  the  cry  was  raised  that  the  older  sec- 
tions of  the  country  had  a  monopoly.  The  absolute  inelas- 
ticity made  it  impossible  to  organize  new  banks  except  as 
old  ones  went  out  of  business.  The  limit  was  raised  in  1870 
to  $354,000,000 ;  but  still  there  was  dissatisfaction.  On  Jan- 
uary 14,  1875,  Congress  passed  the  specie  resumption  act 
coupled  with  which  was  the  "free  banking"  amendment.  It 
repealed  the  inelastic  maximum  limit  to  the  volume  of  out- 
standing national  bank  notes.^*^ 

Dissatisfaction  which  had  been  aroused  with  the  national 
banks  was  not  allayed  by  the  passage  of  the  amendment  of 
1875.  The  opportunity  to  organize  new  banks  was  taken 
advantage  of  in  the  undeveloped  sections  of  the  South  and 
West,  but  there  was  still  a  lack  of  banking  capital.  This 
need  was  misunderstood  to  be  a  need  for  more  currency.  It 
was  believed  that  United  States  notes  rather  than  national 
bank  notes  would  best  meet  the  situation.  The  Greenback 
movement,  with  its  demand  for  a  substitution  of  Greenbacks 
for  national  bank  notes  arose.  Comptroller  Knox  in  his  re- 
ports in  1875  and  1876  showed  the  fallacy  of  the  ''double 
profit"  on  circulation  argument,  but  his  reasoning  was  not 
convincing.  During  the  years  immediately  following  the 
Civil  War  the  profit  on  circulation  may  have  been  considera- 
ble, but  no  better  argument  is  needed  to  show  that  by  1875 
the  charge  was  without  foundation  than  the  decline  of  about 
twenty-five  millions  in  the  circulation  between  October, 
1875,  and  the  corresponding  date  in  1876.  In  Iowa  the  maxi- 
mum circulation  attained  during  the  first  thirty-five  years  of 
the  national  system  was  reached  in  1874.  In  that  year  the 
amount  was  $5,220,000;  two  years  later  the  total  was  $3,- 
881,000.  Perhaps  the  liquidation  following  the  panic  of 
1873  was  responsible  in  part  for  this  sharp  decline,  for 
there  was  also  a  decrease  in  the  number  of  banks  and  total 
assets  in  these  two  years,  but  this  decrease  was  less  pro- 
nounced than  the  falling  off  in  circulation.^''^ 


DEVELOPMENT  OF  BANKING  145 

Despite  the  weakness  of  its  case  against  the  national 
banks,  the  Greenback  movement  grew  and  the  party  was 
strongly  supported  in  the  State.  Iowa  was  largely  an  agri- 
cultural Commonwealth,  whose  farmers  were  in  debt  for 
land  purchased  and  improvements  made.  Declining  com- 
modity prices  were  unwelcome  and  any  promise  of  cheaper 
money  was  likely  to  win  support.  In  the  Congressional  cam- 
paign of  1878  two  Iowa  Greenbackers,  James  B.  Weaver  and 
E.  H.  Gillette  were  elected  to  the  House  of  Representatives. 
Their  support  came  mainly  from  the  rural  townships.  In 
that  campaign  1,000,365  votes  were  cast  for  the  Greenback 
party  in  the  entire  country,  and  Iowa  was  credited  with  first 
place  in  number  of  votes  cast  for  the  party.  In  1880  James 
B.  Weaver  of  Iowa  was  the  presidential  candidate  of  the 
Greenback  party.  The  total  vote  cast  for  him  was  only 
about  one-third  of  that  cast  by  the  party  in  1878,  Iowa  giv- 
ing him  only  32,701  votes.^^*' 

The  notes  of  national  banks  which  had  reached  a  high 
level  in  1882-1883  began  thereafter  to  decline.  Surplus 
revenue  coming  into  the  United  States  Treasury  was  used 
for  the  purchase  of  bonds  at  a  premium,  and  bonds  with  a 
par  value  of  $100  sold  as  high  as  $130  in  1888.  This  greatly 
reduced  the  volume  of  outstanding  bank  notes.  Between 
1883  and  1890  the  total  bank  note  currency  fell  from  $361,- 
882,000  to  $122,928,084  notwithstanding  the  growth  of  prop- 
erty and  trade  activity.^ ^^  This  was  only  a  little  more  than 
one-third  of  the  volume  in  1883. 

Under  the  act  of  1864  a  bank  was  required  to  deposit 
bonds  equal  to  one-third  of  its  capital  stock.  An  amendment 
of  1882  fixed  the  minimum  amount  of  bonds  to  be  held  by 
national  banks  at  not  less  than  one-fourth  of  the  capital 
stock  but  no  bank  was  required  to  hold  bonds  in  excess  of 
$50,000.^^2  Regardless  therefore  of  the  profit  which  might 
be  expected  from  note  issue  a  national  bank  was  compelled 
to  own  a  certain  amount  of  bonds.    In  1890  it  appears  that 

10 


146  HISTORY    OF    BANKING    IN    IOWA 

291  new  national  banks  issued  currency  only  eighteen- 
hundreclths  of  one  per  cent  in  excess  of  the  legal  minimum 
amount  of  bonds  which  they  were  required  to  deposit  ac- 
cording to  the  terms  of  the  law.^^^ 

In  Iowa  a  similar  decline  was  taking  place.  The  recovery 
after  1876  had  continued  until  1882,  when  the  circulation 
was  again  close  to  the  $5,000,000  mark.  In  1890  Iowa  banks 
had  outstanding  only  $2,667,000  of  notes — the  lowest  figure 
since  1865.  The  number  of  banks  had  increased  from  sev- 
enty-five in  1880  to  one  hundred  and  thirty-nine  in  1890, 
and  their  assets  had  more  than  doubled.^  ^^  The  failure  of 
the  national  banks  in  Iowa  to  increase  in  number  as  rapidly 
as  State  chartered  institutions  during  the  decade  of  the 
eighties  may  be  attributed  in  part  to  the  fact  that  note  issue 
had  become  unprofitable. 

A  reason  for  choosing  national  instead  of  State  incorpo- 
ration was  the  prestige  derived  from  membership  in  the 
national  system.  Investors  and  depositors  alike  looked 
upon  the  national  bank  as  a  more  desirable  place  in  which 
to  put  their  money.  In  dealings  between  citizens  of  differ- 
ent States  the  national  bank  had  advantages  in  competition. 
As  offsets  to  these  points  in  favor  of  the  national  system 
there  were  certain  advantages  arising  from  incorporation 
under  State  laws.  The  State  chartered  banks  were  per- 
mitted to  make  real  estate  loans ;  the  State  law  allowed  an 
individual  liability  of  twenty  per  cent  of  the  capital,  while 
the  national  banks  were  limited  to  ten  per  cent ;  the  reserve 
requirements  were  less  stringent;  and  the  capital  required 
was  considerably  lower,  the  minimum  amount  being  $10,000 
for  savings  banks,  $25,000  for  State  banks,  and  $50,000  for 
national  banks.  National  banks,  therefore,  were  unable  to 
maintain  the  lead  against  the  State  authorized  institutions. 
The  number  of  State  and  savings  banks  exceeded  the  na- 
tional banks  in  1890  and  their  combined  assets  surpassed 
those  of  the  national  banks  three  years  later.    The  growth 


DEVELOPMENT  OF  BANKING 


147 


^ 


I     ^     §     ^     I     S     §     §     I     g     S     ?     g     }5     g     ^ 


'^">» 

T— 

\ 

s_ 

> 

1 

ro 

"^ 

•^ 

^v.. 

\ 

"^^. 

s 

-^ 

\ 
\ 

ov 

■J 

p 

^ 

->^ 

"^^ 

"^v. 

N, 

■J 

11  i 

CD      10 

«0 

1         -T 

^ 

•^ 

V, 

> 

o 

i. 

«v,__^ 

? 

NATIONAL    BANKS       

STATE    AND    SAVINGS    BAh 
AND    TRUST    COMPANIES 

^ 

"s. 

p 
5^ 

■ 

N 

-hz|z 

\ 

< 

TOTAL    ASSENTS 
AND  STATE   AND  ^ 
TRUST   OOMPANiE, 

\ 

^ 

O 

\ 
\ 

\ 

0) 

1 

V 

03 

\ 

00 

\ 

\ 

^ 

Si 

jvn- 

loa 

JO 

SN 

on 

IIW 

^ 

If 

0 

W5 

55 

0 

to 
on 

CO 

8 

to 

}2 

g 

I 

o 

in 

o 

o 

o 

p 

o 

» 

1^ 

148  HISTORY    OF    BANKING    IN    IOWA 

of  resources  in  the  national  banks  and  a  comparison  with 
those  of  the  State  chartered  banks  is  shown  in  Chart  I. 

In  1900  the  national  banking  law  was  amended  so  as  to 
permit  the  issue  of  circulation  up  to  the  full  par  value  of 
the  bonds  deposited,  instead  of  the  former  limit  of  ninety 
per  cent,  the  tax  on  circulation,  secured  by  two  per  cent 
bonds,  was  reduced  to  one-half  per  cent  annually;  and  per- 
mission was  granted  for  the  establishment  of  national  banks 
in  towns  of  3000  or  less,  with  a  capital  of  $25,000.^^^  The  six 
years  following  these  changes  saw  an  increase  of  more  than 
one  hundred  in  the  number  of  national  banks,  a  doubling  of 
circulation,  and  an  increase  of  about  seventy  per  cent  in 
total  assets.  Many  of  the  new  national  banks  were  the  re- 
sult of  the  rechartering  of  existing  State  institutions  under 
national  law;  but  while  the  national  banks  were  increasing 
in  number  and  strength  an  even  greater  growth  of  State 
chartered  institutions  was  taking  place.  Chartered  banks 
were  also  gaining  at  the  expense  of  the  private  banks.^^^ 
This  general  growth  in  banking  institutions,  indicated  in 
Table  III,  was  an  accompaniment  of  a  period  of  great  pros- 
perity and  business  activity.  In  Iowa  the  growth  of  banking 
resources,  scarcely  checked  by  the  panic  of  1907,  has  con- 
tinued until  the  present  time.  The  important  modifications 
of  the  national  system  which  came  with  the  passage  of  the 
Federal  Reserve  Act  in  1913  are  discussed  in  Chapter  X. 


DEVELOPMENT  OF  BANKING 
Table  III 


149 


Number,  Deposits,  Capital  Stock,  and  Total  Assets  of  the 

National  Banks  in 

Iowa,  1863-192C 

357 

Date 

Number 

Deposits 

Capital  Stock 

Total  Assets 

1863 

3 

$               245 , 000 

S                97,000 

$             390,000 

1864 

20 

1,698,000 

1,145.000 

4,004,000 

1865 

36 

5,110,000 

3.196.000 

11,128,000 

1866 

45 

4,890,000 

3,722,000 

13,079,000 

1867 

45 

5,234,000 

3,842,000 

13,523,000 

1868 

44 

6,444,000 

3,692,000 

14,809,000 

1869 

43 

5,252,000 

3,742,000 

13,891,000 

1870 

43 

5,248,000 

3,802,000 

14,306,000 

1871 

57 

7,014,000 

4,780,000 

18,097,000 

1872 

70 

7,853,000 

5,632,000 

20,926,000 

1873 

75 

9,380.000 

5,812,000 

22,902,000 

1874 

75 

9,232,000 

6.017.000 

23.208,000 

1875 

81 

10,851,000 

6.352,000 

24,932,000 

1876 

78 

8.004,000 

6,287,000 

21,198,000 

1877 

78 

7,842,000 

6,057,000 

20,808,000 

1878 

76 

7,129,000 

5,957,000 

19,619,000 

1879 

73 

8,752,000 

5,707,000 

21,125,000 

1880 

75 

11,608,000 

5.867,000 

24,842,000 

1881 

76 

15,770,000 

5,950,000 

29,997,000 

1882 

88 

16,169,000 

7,135,000 

32,305.000 

1883 

110 

16,648,000 

9,055,000 

35,265,000 

1884 

123 

16,124,000 

10,146,000 

35,609,000 

1885 

125 

17,054,000 

10,155,000 

36,845,000 

1886 

128 

17.814,000 

10,295,000 

37.902,000 

1887 

128 

19,285,000 

10,150,000 

38.810,000 

1888 

129 

21,278,000 

10,148,000 

41,841,000 

1889 

133 

21.182,000 

10,585.000 

42,671,000 

1890 

139 

26,800,000' 

11,320,000 

61,188,000 

1891 

151 

28,354,000 

13.460,000 

54,881,000 

1892 

161 

32,296,000 

14.520,000 

62,356,000 

1893 

169 

24.624.000 

14.700,000 

52,830,000 

1894 

169 

27,490.000 

13,855,000 

56,325,000 

1895 

167 

24,897,000 

13,430.000 

52,687,000 

1896 

166 

23.725,000 

13.095,000 

50,100,000 

1897 

165 

27.502.000 

13.020.000 

56,224,000 

1898 

168 

32.871.000 

13,150,000 

64,118,000 

1899 

172 

42,238.000 

13.300,000 

81,937,000 

1900 

196 

49,041,000 

14,035,000 

94,829,000 

1901 

221 

61.677.000 

15,032,000 

115,321,000 

1902 

230 

66,585,000 

15,485,000 

117,700,000 

1903 

253 

64.336,000 

16,582,000 

118,279,000 

1904 

269 

61.206,000 

17.053,000 

117,190,000 

1905 

281 

69,709,000 

17,665,000 

134,197,000 

150 


HISTORY    OF    BANKING    IN   IOWA 
Table  III  (continued) 


Number,  Deposits,  Capital  Stock,  and  Total 

Assets  of  the 

National  Banks  in 

Iowa,  1863-192C 

357 

Date 

Number 

Deposits 

Capital  Stock 

Total  Assets 

1906 

297 

$       81,780,000 

$        18,705,000 

S   156,614,000 

1907 

304 

92,873,000 

18,735,000 

170,841,000 

1908 

319 

94,473,000 

20,330,000 

177,062,000 

1909 

320 

102,900.000 

20,585,000 

188,393,000 

1910 

326 

107,462,000 

20,991,000 

194,261 .000 

1911 

329 

110,389,000 

21,520,000 

202,020,000 

1912 

338 

125,011.000 

22,280,000 

230,919,000 

1913 

340 

131,404,000 

23,085,000 

234,583,000 

1914 

343 

134,539,000 

23,460.000 

232,614,000 

1915 

348 

142,338,000 

23,855,000 

243,045,000 

1916 

353 

160,728.000 

24,289,000 

270,732,000 

1917 

351 

196,530,000 

24,400,000 

333,114,000 

1918 

353 

206 , 829 , 000 

24,560,000 

367,174,000 

1919 

355 

258,277,000 

25,115,000 

422,381,000 

1920 

358 

264 , 132 , 000 

26,420,000 

459,043,000 

STATE  BANKS 

Provisions  of  the  Code  of  1873  constitute  the  basis  for  the 
regulation  of  State  banks  in  Iowa.  The  law  did  not  give 
the  Auditor  adequate  control  over  the  State  banks,  and 
therefore  certain  amendments  were  soon  adopted.^ ^*  The 
first  amendment  which  affected. State  banks  came  in  1880 
and  applied  to  all  banks  and  banking  institutions  alike.  It 
was  made  a  felony,  punishable  by  fine  or  imprisonment  or 
both,  for  banks  to  receive  deposits  when  insolvent.  In  the 
same  year  a  law  was  passed  amending  the  Code  of  1873  so 
as  to  impose  double  liability  on  the  stockholders  of  banking 
corporations.  Both  of  these  laws  were  intended  for  the 
protection  of  depositors.^^^ 

In  1886  an  act  was  passed  which  defined  State  banks  and 
required  the  use  of  the  word  ^ '  State ' '  in  the  name  of  a  bank 
incorporated  under  the  general  incorporation  laws.  Unin- 
corporated banks  and  savings  banks  were  not  allowed  to  use 
the  word  ''State"  as  part  of  their  title.    An  exception  was 


DEVELOPMENT  OF  BANKING  151 

made  in  the  case  of  national  banks  by  allowing  them  to  be  so 
designated.  Incorporated  banking  associations,  except  sav- 
ings banks,  already  in  existence,  were  required  to  amend 
their  articles  of  incorporation  to  comply  with  this  law.^®*' 

Two  acts  were  passed  in  1894  to  provide  for  the  better 
security  of  depositors  in  State  banks.  The  first  of  these 
included  the  savings  banks  and  prescribed  that  in  case  the 
capital  stock  of  any  bank  became  impaired  it  was  the  duty 
of  the  board  of  directors  to  levy  an  assessment  to  meet  the 
deficiency.  Failure  to  pay  the  assessment  upon  notice  duly 
given  must  be  followed  by  sale  of  the  stock  at  public  auction. 
Neglect  by  the  directors  to  proceed  under  the  act  when  re- 
quested in  writing  by  the  owners  of  two-thirds  of  the  stock 
of  the  bank  rendered  them  personally  liable  to  the  creditors 
or  stockholders.  The  second  act  of  the  same  date  was  lim- 
ited to  State  banks  and  covered  points  already  contained  in 
the  savings  bank  law.  Under  its  terms  bank  directors  were 
prohibited  from  receiving  any  compensation;  and  all  loans 
to  directors,  officers,  or  agents  of  the  bank  were  to  be  upon 
the  same  security  as  that  required  of  other  borrowers  and 
under  the  same  rules.  All  such  loans  must  be  made  by  the 
directors,  the  party  concerned  being  absent  from  the  meet- 
ing. False  entries  or  false  statements  knowingly  made  by 
an  officer  or  agent  of  a  bank  were  made  felonies,  punishable 
by  fine  or  imprisonment.  The  board  of  directors  was  re- 
quired to  appoint,  from  its  own  members,  an  examining 
committee  whose  duty  it  was  to  examine  the  bank  quarterly 
and  report  to  the  board.  The  maximum  amount  the  bank 
was  permitted  to  loan  to  any  individual  or  firm  was  limited 
to  twenty  per  cent  of  the  paid-up  capital  stock.^^^ 

The  Code  of  1897  brought  together  the  bank  laws  of  the 
State  and  also  added  certain  important  provisions.  The 
requirement  that  banks  should  file  articles  of  incorporation 
with  the  county  recorder  and  the  Secretary  of  State  was 
renewed.     The  provision  regarding  minimum  capital  stock 


152  HISTORY    OF   BANKING   IN   IOWA 

of  $25,000  for  towns  of  3000  or  less  and  $50,000  for  larger 
places  was  continued.  Shares  were  to  be  fully  paid  up  and 
carry  a  double  liability.  Management  was  placed  in  the 
hands  of  not  less  than  five  directors,  who  in  order  to  qualify 
had  to  own  from  two  to  five  shares  of  stock  according  to  the 
capitalization  of  the  bank.  Banks  in  towns  under  3000 
population  were  required  to  keep  a  cash  reserve  of  ten  per 
cent  of  the  total  deposits ;  other  banks  were  required  to  have 
a  fifteen  per  cent  reserve.  In  either  case  three-fourths  of 
the  required  reserve  might  be  kept  on  deposit,  subject  to 
call,  with  other  banks  under  State  or  national  laws.  A 
piece  of  new  legislation  found  in  the  Code  is  the  requirement 
that  all  State  chartered  banks  must  keep  in  the  bank  sub- 
ject to  inspection  during  business  hours  a  complete  list  of 
officers,  directors,  and  stockholders,  and  the  number  of 
shares  held  by  each.^^^ 

The  maximum  limit  on  a  loan  to  any  individual  of  twenty 
per  cent  of  the  capital  stock  of  the  bank  was  raised  in  1902 
to  fifty  per  cent  when  the  loan  was  secured  by  real  estate. 
The  requirement  that  the  real  estate  offered  as  security  be 
worth  twice  the  amount  loaned  was  not  changed.^^^  In  1907 
the  sections  of  the  Code  relating  to  loans  to  officers  were 
repealed  and  reenacted  on  the  same  principles.  Such  loans 
can  only  be  made  by  a  vote  of  the  board  of  directors  in  the 
absence  of  the  applicant  and  on  the  same  terms  as  are  re- 
quired of  other  borrowers.^^^ 

In  1913  the  General  Assembly  authorized  State  and  sav- 
ings banks  to  deposit  with  the  Treasurer  of  the  United 
States  such  securities  as  might  be  required  in  order  to 
secure  the  postal  savings  funds  deposited  therein.  Addi- 
tional trust  powers  were  also  conferred  in  1913  and  1915. 
In  1915  State  banks  were  permitted  to  become  members  of 
the  Federal  reserve  system.^^^  In  1917  the  reserve  require- 
ment was  modified  by  increasing  the  proportion  of  reserve 
which  might  be  kept  in  the  vaults  of  other  banks  from 


DEVELOPMENT  OF  BANKING  153 

seventy-five  per  cent  to  eighty-five  per  cent  of  the  total 
amount  required  by  law.^^^  Two  years  later  the  reserve 
requirement  was  raised  and  made  to  conform  with  the  sav- 
ings bank  law.  This  fixed  the  reserves  in  all  State  banks 
located  in  towns  of  less  than  3000  population  at  fifteen  per 
cent  of  the  sight  and  demand  deposits  and  eight  per  cent  of 
the  savings  deposits  and  time  certificates  of  indebtedness. 
For  towns  above  3000  population  the  proportions  were 
twenty  and  eight  per  cent  respectively.  In  both  classes  the 
banks  were  permitted  to  keep  eighty-five  per  cent  in  other 
banks  under  State  or  national  laws.^^^  A  further  amend- 
ment allowed  the  State  banks  which  are  members  of  the 
Federal  reserve  system  to  conform  to  the  reserve  require- 
ments of  the  national  bank  members.^®^  This  meant  that 
the  legal  reserve  might  be  reduced  to  ten  per  cent  for  banks 
in  reserve  cities  and  seven  per  cent  for  country  banks.  All 
of  the  required  reserve  would  be  held  in  the  Federal  reserve 
bank  of  the  district. 

State  banks,  as  distinguished  from  savings  banks  under 
State  charters,  numbered  twenty-three  in  1875,  increased 
nine  in  the  next  biennium,  then  remained  at  about  the  same 
figure  for  four  years.  Since  that  time  they  have  grown 
steadily  in  number.  In  the  late  nineties  they  outnumbered 
the  national  banks,  ranking  second  in  number  to  the  private 
banks.  After  1900  there  was  an  unusual^expansion  in  the 
number  of  savings  banks,  which  placed  that  class  far  in  the 
lead  so  far  as  numbers  is  concerned.  State  and  national 
banks  have  about  kept  pace  since  that  time.  The  high 
minimum  capital  requirement  for  national  banks  had  been 
a  bar  against  national  incorporation.  Of  the  two  hundred 
and  seven  State  banks  doing  business  in  Iowa  in  1899  only 
eighty-seven  had  a  capital  of  $50,000  or  over — the  minimum 
then  permitted  for  national  banks.  The  following  year  the 
capital  requirement  was  lowered  to  $25,000  for  national 
banks  in  towns  of  less  than  3000.     By  1909  the  records 


154  HISTORY    OF    BANKING    IN    IOWA 

show  that  three  hundred  and  twenty  national  banks  were 
operating  in  Iowa ;  of  these,  one  hundred  and  fifteen  had  a 
capital  of  less  than  $50,000.^^''  Capital  requirements  have 
been  practically  the  same  for  national  and  State  banks  since 
1900.  The  loan  and  reserve  requirements  were  more  favor- 
able to  State  banks  until  recently.  On  the  other  hand,  the 
national  banks  have  had  the  circulation  privilege  which 
after  the  amendments  of  1900  again  became  a  source  of 
profit.  The  numbers  of  State  and  national  banks  have  re- 
mained fairly  near  equal  for  twenty-five  years  or  more. 
The  reasons  for  the  greater  growth  of  savings  banks  will  be 
discussed  in  the  following  sections. 

SAVINGS  BANKS 

Two  main  types  of  savings  banks  are  found  in  the  United 
States.  The  mutual  savings  bank  was  copied  from  English 
institutions  and  is  found  almost  exclusively  in  the  older 
sections  of  the  country,  particularly  in  New  England.  It 
has  no  capital  or  stockholders,  but  is  operated  for  the  bene- 
fit of  the  depositors  by  a  board  of  trustees  who  often  serve 
without  pay.  All  the  profits  above  the  expenses  of  carrying 
on  the  business  are  divided  among  the  depositors.  The 
function  of  this  type  of  bank  is  primarily  to  invest  the  sav- 
ings of  the  man  of  small  income  who  is  inexperienced  in 
making  investments  or  whose  savings  are  too  small  for 
profitable  investment.  A  second  type  of  savings  bank  is 
the  stock  savings  bank.  In  this  class  a  fixed  rate  of  interest 
is  paid  to  depositors  and  the  profits  remaining  are  divided 
among  the  stockholders.  These  may  differ  in  no  essential 
function  from  the  mutual  savings  bank  or  they  may  be  pri- 
marily commercial  banks  and  only  nominally  savings  insti- 
tutions. Savings  banks  in  Iowa  are  all  of  the  latter  type.^'''" 
Stock  savings  banks  are  so  much  more  numerous  in  Iowa 
than  elsewhere  in  the  United  States  that  their  history  in 
this  State  possesses  unusual  interest  for  the  student  of 


DEVELOPMENT  OF  BANKING  155 

banking.  Of  1185  stock  savings  banks  in  the  United  States 
reporting  in  1917  to  the  Comptroller  of  the  Currency,  892 
were  in  lowa.^'^^ 

This  unusual  number  of  institutions  under  the  savings 
title  must  largely  be  accounted  for  by  the  provisions  of  Iowa 
law.  They  are,  for  the  most  part,  banks  of  discount,  differ- 
ing to  no  considerable  extent  from  the  State  and  national 
banks.  It  will  be  recalled  that  the  act  of  1874  in  defining 
the  legal  investments  for  savings  banks  included  the  right 
"to  discount,  to  purchase,  sell,  and  make  loans  upon  com- 
mercial paper,  notes,  bills  of  exchange,  drafts,  or  any  other 
personal  or  public  security  ".^'^^  This  left  the  Iowa  savings 
banks  practically  free  to  do  a  strictly  commercial  business. 

Various  reasons  explain  why  Iowa  bankers,  although  in- 
tending to  engage  primarily  in  commercial  banking,  have 
chosen  to  incorporate  under  the  savings  bank  law.  The 
fact  that  the  savings  bank  law  was  more  explicitly  and  com- 
pletely formulated  at  an  early  date  no  doubt  led  some  banks 
to  choose  incorporation  thereunder  rather  than  under  the 
more  general  incorporation  laws  governing  the  State  banks. 
The  most  important  reason,  however,  for  the  large  number 
of  savings  banks  has  been  the  lower  capital  requirement. 
Under  the  terms  of  the  savings  bank  law  of  1874  these  in- 
stitutions were  permitted  to  organize  in  towns  of  less  than 
10,000  population  with  a  capital  of  $10,000.  The  minimum 
capital  permitted  to  State  banks  was  $25,000  for  towns  of 
3000  or  less  and  $50,000  for  cities  having  a  greater  popula- 
tion; the  same  was  true  for  national  banks  after  1900.  Out 
of  sixty-eight  savings  banks  organized  in  the  two  years 
ending  July  1,  1901,  fifty-four  had  insufficient  capital  to 
incorporate  either  as  State  or  national  banks.^'^^  In  1909 
three  hundred  and  forty-nine  out  of  five  hundred  and  sev- 
enty-two, or  more  than  sixty-one  per  cent  of  the  savings 
banks  in  Iowa  had  a  capital  of  less  than  $25,000.^^^  More- 
over, State  and  national  banks  are  required  by  law  to  have 


156  HISTORY    OF    BANKING    IN    IOWA 

a  minimum  capital  of  $50,000  in  towns  of  3000  or  more  popu- 
lation, and  in  the  ease  of  the  national  banks  this  minimum 
is  graduated  up  to  $200,000  in  cities  over  50,000.  Although 
before  1917  savings  banks  could  be  incorporated  in  any  town 
of  less  than  10,000  population  with  a  capital  of  $10,000, 
some  banks  having  capital  stock  of  $25,000  or  over,  in  1909, 
would,  nevertheless,  have  been  unable  to  meet  the  capital 
requirements  for  national  or  State  banks  in  these  towns. 
In  addition  there  were  some  savings  banks,  capitalized  at 
$25,000  or  more,  which  had  been  organized  with  a  capital 
stock  less  than  $25,000  and  gradually  enlarged.  We  must, 
therefore,  include  a  considerable  number  of  other  banks 
with  the  three  hundred  and  forty-nine  shown  to  be  below  the 
$25,000  minimum  in  order  to  determine  the  number  of  banks 
which  were  incorporated  as  savings  banks  solely  on  account 
of  the  capital  requirement.  Although  it  is  not  possible  to 
get  exact  statistics  on  this  point,  this  reason  seems  to  be 
the  fundamental  explanation  for  about  two-thirds  of  Iowa's 
savings  banks. 

The  savings  bank  law  of  1874  has  undergone  certain 
modifications  in  detail  during  the  forty-five  intervening 
years.  In  recent  years  the  provisions  relating  to  the  in- 
vestment of  funds  have  been  widened.  Drainage  bonds 
were  included  among  the  lawful  investments  in  1906;  and 
in  1913  an  amendment  was  passed  permitting  investment  in 
notes  or  bonds  secured  by  real  estate  outside  of  Iowa  if  the 
real  estate  was  situated  in  any  county  adjoining  the  Iowa 
State  line.  This  was  further  extended  in  1917  to  any  ad- 
joining State,  except  that  no  loan  may  be  made  on  real 
estate  west  of  the  hundredth  meridian  line. 

It  was  specified  in  the  savings  bank  law  that  a  savings 
bank  may  own  the  lot  and  building  in  which  its  business  is 
carried  on.  Under  the  power  thus  granted  them,  savings 
banks  have  sometimes  built  large  office  buildings,  upon  the 
ground  floor  of  which  is  located  the  bank's  own  business 


DEVELOPMENT  OF  BANKING  157 

room.'^"°  In  the  Code  of  1897  savings  banks  doing  a  com- 
mercial business  were  required  to  keep  cash  reserves  as 
follows ;  in  towns  under  3000  population  they  were  to  keep 
a  reserve  of  fifteen  per  cent  of  the  commercial  deposits  and 
eight  per  cent  of  the  savings  deposits;  banks  located  in 
towns  of  over  3000  population  were  to  keep  twenty  per  cent 
and  eight  per  cent  respectively ;  and  if  any  bank  was  doing 
an  exclusively  saving  business  it  was  to  keep  eight  per  cent 
of  its  deposits  in  reserve.  Three-fourths  of  the  reserve  of 
all  classes  might  be  kept  in  other  State  or  national  banks.^^^ 
In  1915  the  law  was  revised  by  changing  the  word  "com- 
mercial "  to  '  *  sight  and  demand ' '  and  adding  after  ' '  savings 
deposits"  the  words  "and  time  certificates  having  a  fixed 
and  definite  time  of  maturity".  The  effect  of  this  was  to 
reduce  the  reserve  against  time  certificates  from  fifteen  per 
cent  to  eight  per  cent,  this  class  of  deposits  having  formerly 
been  treated  as  commercial  accounts.^^"^  An  amendment  in 
1917  raised  the  percentage  of  reserves  which  a  bank  might 
keep  in  other  banks  from  seventy-five  per  cent  to  eighty-five 
per  cent.^"^^  This  reduced  the  legal  cash-in-bank  reserve  to 
an  almost  nominal  amount — about  two  per  cent  when  com- 
puted on  all  deposits  of  a  small  town  bank.  The  reserve 
requirement  was  further  modified  in  1919  by  permitting 
any  savings  bank  which  became  a  member  of  the  Federal 
reserve  system  to  keep  the  same  reserve  as  national  bank 
members.^  ^® 

By  an  amendment  passed  in  1900  savings  banks  were 
allowed  to  add  their  surplus  to  the  capital  stock  when  com- 
puting the  percentage  of  deposits,  the  aggregate  deposits 
being  limited  to  ten  times  the  combined  capital  and  surplus 
of  the  bank.  This  limit  was  raised  two  years  later  to  twenty 
times  the  capital  and  surplus.  The  restriction  on  with- 
drawal of  deposits  which  had  been  imposed,  requiring  sixty 
days'  notice  for  withdrawal,  was  changed  in  1900  to  apply 
only  to  time  deposits.     In  1913  the  legislature  authorized 


158  HISTORY    OF    BANKING    IN    IOWA 

State  and  savings  banks  to  deposit  with  the  Treasurer  of 
the  United  States  such  securities  as  may  be  required  to 
secure  the  postal  savings  funds  deposited  therein.^**^ 

In  the  case  of  savings  banks,  as  of  State  banks,  legisla- 
tion was  passed  in  1894  for  the  protection  of  depositors 
which  required  any  impairment  of  the  capital  stock  to  be 
made  good  by  assessment  on  the  stockholders.  The  penalty 
for  failure  to  pay  is  forfeiture  of  the  stock,  or  of  so  much 
as  is  necessary  to  meet  the  assessment.  Neglect  on  the  part 
of  the  directors  to  proceed  to  an  assessment,  when  requested 
by  the  owners  of  two-thirds  of  the  stock,  with  the  consent  of 
the  State  Auditor,  makes  the  directors  individually  liable. 
As  a  further  means  of  strengthening  the  banks  a  surplus 
fund  was  authorized  in  1900.  Directors  were  permitted  to 
set  aside  a  surplus  fund  from  the  earnings  which  was  to  be 
maintained  separate  from  the  undivided  profits  account. 
This  fund  could  be  invested  in  the  same  manner  as  the  cap- 
ital, and  might  be  made  use  of  as  a  stock  dividend  for  in- 
creasing the  capital  of  the  bank.  It  was  not  ordinarily  to  be 
drawn  on  for  expenses,  but  if  needed  for  this  purpose  could 
be  transferred  back  in  whole  or  in  part  to  the  undivided 
profits  account.  This  could  be  done,  however,  only  if  the 
capital,  or  capital  and  remaining  portion  of  the  surplus 
equalled  ten  times  (later  twenty  times)  the  deposits.  In 
1917  banks  were  given  authority  to  reduce  the  capital  stock 
on  the  afiSrmative  vote  of  two-thirds  of  the  shareholders, 
with  the  approval  of  the  Superintendent  of  Banking.^^^ 
Furthermore,  at  the  1917  session  of  the  legislature  a  law 
was  passed  ^^^  which  modified  the  capital  requirement  of 
savings  banks.  The  minimum,  which  prior  to  1917  had  been 
$10,000  in  cities  under  10,000  population  and  $50,000  in 
places  with  a  larger  population  was  graduated  in  steps  as 
follows : 

In  towns  of  1000  population  or  less $10,000  capital 

In  towns  of  1000  but  less  than  2000 15,000  capital 


DEVELOPMENT  OF  BANKING  159 

In  towns  of  2000  but  less  than  10,000 $25,000  capital 

In  towns  of  over  10,000 50,000  capital 

The  limit  on  the  amount  which  could  be  loaned  to  one 
individual  was  raised  in  1902  from  twenty  per  cent  to  fifty 
per  cent  of  the  bank's  capital  in  case  the  loan  was  secured 
by  real  estate.  This  was  further  raised  in  1915  to  allow 
fifty  per  cent  of  the  surplus  also  to  be  loaned  to  one  person 
on  real  estate  security.^^^ 

Amendments  have  been  made  from  time  to  time  in  the 
provisions  for  the  management  of  savings  banks.  Originally 
the  number  of  directors  had  been  from  five  to  nine,  a  major- 
ity of  whom  constituted  a  quorum.  In  1888  the  additional 
restriction  on  a  quorum  of  the  directors  provided  that  in 
no  case  could  a  measure  be  passed  unless  it  received  three 
affirmative  votes.  Instead  of  requiring  all  the  directors  to 
be  citizens  of  Iowa,  the  Code  of  1897  reduced  the  require- 
ment to  three-fourths  of  the  board.  The  number  of  shares 
of  stock  required  by  a  shareholder  to  qualify  as  a  director 
was  graduated  according  to  the  capital.  An  amendment 
passed  in  1913  permitted  the  stockholders  of  banks  to  allow 
directors  a  reasonable  compensation  for  attending  board 
meetings.  Four  years  later  the  legislature  amended  the 
section  of  the  law  which  had  limited  the  maximum  number 
of  directors  to  nine,  leaving  this  thereafter  to  the  discretion 
of  the  stockholders.  In  1921  the  law  pertaining  to  State 
banks  was  also  amended  in  this  particular,  so  that  the  laws 
for  both  classes  of  banks  are  similar  on  this  point.  No 
State  or  savings  bank  may  now  have  less  than  five  directors 
nor  more  than  the  number  designated  by  its  articles  of  in- 
corporation. But  within  these  limits  the  stockholders  are 
free  to  change  the  number  by  resolution  at  any  annual 
meeting.^  ^^ 

Savings  banks  are  the  oldest  incorporated  banks  of  record 
in  Iowa.  Until  the  late  nineties,  however,  they  were  the 
least  numerous  of  the  various  classes  of  Iowa  banks.    At 


160  HISTORY    OF    BANKING    IN    IOWA 

the  beginning  of  the  present  century,  the  rapid  growth  of 
this  type  of  bank  began  and  they  were  soon  numerically  in 
the  lead  of  any  of  the  other  classes.  While  most  of  the 
savings  banks  are  such  only  in  name,  being  in  fact  small 
commercial  banks,  there  are  some  large  banks  devoted  espe- 
cially to  a  savings  bank  business  which  are  incorporated  as 
savings  banks.  The  German  Savings  Bank  of  Davenport 
(now  the  American  Commercial  and  Savings  Bank),  with 
total  resources  of  $13,215,161  in  1916,  was  at  that  time  the 
largest  bank  in  lowa.^®^ 

LOAN  AND  TRUST  COMPANIES 

The  first  legislation  concerning  loan  and  trust  companies 
is  found  in  the  Code  of  1897.  In  the  final  section  of  the  law 
dealing  with  banks  in  general  is  a  clause  which  prohibits 
any  corporation  from  engaging  in  the  banking  business 
unless  it  conforms  to  the  banking  laws.  An  exception  to 
this  is  made  in  favor  of  loan  and  trust  companies  which 
''may  receive  time  deposits  and  issue  drafts  on  their  depos- 
itories". These  companies  are  then  made  subject  to  the 
same  regulation  and  control  by  the  State  Auditor  as  in  the 
case  of  the  State  and  savings  banks.  Double  liability  for 
stockholders  of  these  institutions  is  also  prescribed.  The 
law  itself  gives  evidence  that  loan  and  trust  companies  had 
been  in  existence  for  several  years.  The  statement  is  made 
that  loan  and  trust  companies  that  had  been  in  continuous 
existence  since  before  January  1, 1886,  need  not  incorporate 
the  word  "State"  in  their  title  in  order  to  become  State 
banks  within  the  provisions  of  the  section.^^^  Statistics  of 
the  number  and  strength  of  the  loan  and  trust  companies  are 
not  easily  obtained  since  they  are  grouped  with  State  banks 
and  not  separately  reported  by  the  Auditor.  In  1909  the 
National  Monetary  Commission  reported  fourteen  loan  and 
trust  companies  in  Iowa;  and  in  1916  there  were  twenty- 
one.^®''' 


DEVELOPMENT  OF  BANKING  161 

In  1900  the  law  specifying  the  limitations  on  deposits  for 
State  banks  was  made  applicable  to  loan  and  trust  com- 
panies. Four  years  later  the  capital  stock  requirements  of 
the  savings  banks  were  also  applied  to  trust  companies.^^^ 
The  first  comprehensive  legislation  concerning  trust  com- 
panies was  enacted  in  1913,  the  act  of  that  year  greatly  ex- 
tending the  powers  of  trust  companies  and  conferring  upon 
State  and  savings  banks  the  same  fiduciary  powers. 

Trust  companies  and  State  and  savings  banks  were  given 
power:  first,  to  be  appointed  assignee,  guardian,  executor, 
trustee,  or  receiver,  in  the  same  manner  as  might  a  natural 
person,  except  that  the  appointment  as  guardian  should 
apply  to  estates  and  not  to  persons ;  second,  to  act  as  fiscal 
or  transfer  agents  or  registrars  for  estates,  municipalities, 
companies,  and  corporations;  third,  to  act  in  execution  of 
trusts  that  may  be  handled  by  any  person  or  corporation; 
fourth,  to  issue  drafts  upon  depositories  and  to  purchase, 
invest  in,  and  sell  promissory  notes,  bills  of  exchange, 
bonds,  mortgages,  and  other  securities;  and  fifth,  to  carry 
on  a  safe  deposit  business. 

The  third  section  of  the  act  emphatically  states  that  the 
trust  funds  must  be  kept  separate  from  other  funds  or 
property  of  the  bank,  the  purpose  of  this  being  plainly  to 
protect  the  trust  funds  from  the  risks  incident  to  banking. 
In  case  the  trust  company  or  bank  should  fail  the  trust  fund 
would  still  be  safe  and  unaffected.  Another  requirement  in 
the  interest  of  safety  for  the  trust  funds  is  that  all  such 
trusts  must  be  reported  to  the  Auditor  of  the  State.  These 
lists  are  to  be  filed  by  the  Auditor  but  their  publication  is 
not  provided  for. 

Banks  acting  in  a  fiduciary  capacity  were  given  the  same 
powers  and  rights  as  individuals  exercising  similar  offices. 
They  must  give  bond  in  the  same  manner  and  receive  the 
same  compensation.  In  case  of  the  dissolution  of  the  corpo- 
ration the  court  having  jurisdiction  is  empowered  to  appoint 

11 


162  HISTORY    OF   BANKING   IN   IOWA 

a  successor  and  release  the  original  trustee.  Any  such  cor- 
poration must  also  have  the  word  ''trust",  or  ''State",  or 
"savings"  as  part  of  its  name.  Moreover,  no  person  or 
corporation  not  complying  with  the  act  may  use  the  word 
"trust"  in  its  name.  The  limit  to  which  a  bank  or  trust 
company  might  become  indebted,  except  to  depositors,  or 
for  regular  expenses,  had  been  the  capital  stock.  This  limi- 
tation was  continued,  but  the  act  stated  that  it  did  not  apply 
to  the  issue  of  bonds  or  debentures  by  a  trust  company  when 
protected  by  real  estate  securities.  The  act  also  defined  the 
profits  from  which  dividends  might  be  declared.  All  trust 
companies  or  banks  exercising  the  powers  given  by  the  law 
were  required  to  set  aside  one-tenth  of  the  net  earnings  as  a 
surplus  fund  until  this  surplus  equalled  at  least  twenty  per 
cent  of  the  net  capital.  This  surplus  must  be  kept  unim- 
paired or  restored  in  the  same  manner  as  originally  accumu- 
lated. 

The  distinctions  which  had  separated  the  functions  of 
trust  companies  from  those  of  State  and  savings  banks  were 
largely  broken  down  by  this  law.  All  general  laws  which 
applied  alike  to  State  and  savings  banks  concerning  state- 
ments, reports,  examinations,  and  the  like,  were  made  to 
apply  to  trust  companies.  The  provisions  of  the  savings 
bank  law  as  to  formation,  renewal  of  charter,  capital,  man- 
agement, deposits,  value  of  shares,  and  reserve  were  applied 
to  trust  companies.  But  the  sections  of  the  savings  bank 
law  as  to  investment  of  funds,  limitation  on  the  right  to  pur- 
chase real  estate,  and  the  payment  of  interest  and  dividends 
were  not  applied  to  the  trust  companies.^ ^^ 

In  1915  practically  all  distinctions  between  the  various 
classes  of  banks,  so  far  as  their  trust  powers  were  con- 
cerned, were  eliminated.  An  amendment  was  passed  which 
permitted  national  banks,  when  authorized  by  the  United 
States  laws,  to  exercise  the  trust  powers  previously  con- 
ferred on  trust  companies,   State   and   savings   banks.^^° 


DEVELOPMENT  OF  BANKING  163 

Powers  of  trust  companies  having  already  been  expanded  in 
the  direction  of  general  banking,  and  the  regular  banks  hav- 
ing now  been  granted  practically  all  trust  company  powers, 
there  was  'in  fact  little  distinction  between  them.  A  con- 
siderable percentage  of  the  trust  companies  of  Iowa  have 
been  organized  in  connection  with  national  banks.  They 
have  had  the  same  officers  and  conducted  their  business  in 
the  same  building.  Although  it  is  no  longer  so  advantageous 
for  a  national  bank  to  form  an  associate  trust  company  or 
savings  bank,  those  already  in  existence  will  doubtless  be 
continued  as  they  are  free  to  carry  on  business  under  the 
trust  company  law  which  is  more  liberal  concerning  real 
estate  ownership  and  loans  than  is  the  national  bank  law. 

PEIVATE  BANKING 

It  has  already  been  shown  that  the  private  banks  arose  in 
Iowa  during  the  years  of  early  statehood  and  that  they 
continued  during  the  period  of  the  dominance  of  the  national 
system.  The  continued  growth  of  these  banks  in  competi- 
tion with  both  national  and  State  chartered  institutions,  the 
efforts  that  have  been  made  to  force  them  under  State  super- 
vision, and  the  decline  in  their  number  which  began  about 
1900  will  be  discussed  in  the  present  section. 

The  growth  in  the  number  of  private  banks  is  shown  in 
Table  IV  and  is  graphically  portrayed  in  Chart  II.  These 
statistics  are  fairly  accurate,  although  there  is  no  complete 
record  of  the  capital,  deposits,  or  total  resources.  In  gen- 
eral, these  banks  are  the  smaller  ones  in  the  State,  as  shown 
by  the  Auditor's  report  of  the  incorporation  of  banks  which 
succeeded  private  banks.^^^ 

Soon  after  the  passage  of  the  savings  bank  law,  agitation 
was  begun  to  bring  the  private  banks  also  under  State 
supervision.  In  his  biennial  report  for  1877  the  Auditor  of 
State,  Buren  R.  Sherman,  set  forth  in  a  very  forceful  way 
the  reasons  why  the  private  banks  should  be  required  to 


164 


HISTORY   OF    BANKING   IN   IOWA 


- 

<r 

\, 

/ 

ft 

N 

\ 

/ 
/ 

IT 

N 

\ 

/ 

<r 

> 

\ 

] 

\ 

\ 

9 

\ 

\ 

f 
f 
1 

; 

Q                                                ^^Sw 

/ 

( 
I 

p 
IT 

N 

a. 
o 

N, 

/ 
/ 

1 

G 

V 

\ 

/ 

1 

C 

UNAU1 
)MPANIE 

\ 

1 

\ 

v^ 

M 

it          2  , 

u 

U 

Q  - 

NAL    BANKS 

BANKS 
SS     BANKS 
AND    TRUS1 

ED 

E    BANKS 

\ 

0 

-  ~  y 

<  ^ 

K 

\ 

g 

\ 

N 

s. 

a 

-    VJ 

or  AU 

OF    lOW/ 

HORIZEC 
NATIO 
STATE 
SAVIN 
LOAN 

^.UTHORIZ 
PRIVAT 

v 
\ 

\ 

\ 

u 

1 

\ 

a 

IT 

Z 

\ 

\ 

\ 

t — 

g 

IZ 
D  < 

Z  10 

1 

/ 

4^ 

1^ — 

\ 

a 

\ 
\ 

a 

0 

\ 
\ 

^ 

' 

C 

c 

c 

) 

C 

>        Q 

c 

►      a 

G 

c 

>       0 

o 

9 

o 

O 

o 

c 

) 

r 

DEVELOPMENT  OF  BANKING  165 

make  regular  reports.  He  called  attention  to  the  number  of 
failures  which  had  occurred  during  the  past  two  years  as 
evidence  of  the  need  of  protecting  the  general  interests  of 
the  people.  The  keynote  of  his  argument  is  struck  in  the 
sentence : ' '  Banking  is  a  public  and  peculiar  business. ' '  The 
man  who  is  entrusted  with  the  care  of  the  people's  money, 
he  believed,  should  be  subjected  to  publicity  in  his  business. 
He  also  advocated  a  minimum  capital  requirement  as  a 
protection  to  the  depositors.  No  action  was  taken  by  the 
legislature  on  this  recommendation,  although  Governor  J. 
G.  Newbold  in  his  biennial  message  to  the  legislature  had 
supported  the  recommendation  of  the  Auditor.  Two  years 
later  Mr.  Sherman  renewed  his  request  ;^^^  but  aside  from 
prohibitions  upon  the  use  of  the  words  ''State"  or  ** sav- 
ings" in  the  titles  adopted  by  such  banks,  no  legislation  was 
enacted. 

The  movement  to  enact  legislation  for  the  control  of 
private  banks  was  further  endorsed  in  the  report  of  Auditor 
W.  V.  Lucas  and  in  the  message  of  Governor  J.  H.  Gear  to 
the  next  legislature.^''^  In  1885  Auditor  J.  W.  Cattell  ad- 
vised the  enactment  of  a  law  similar  to  one  which  had  re- 
cently been  enacted  in  New  York  forbidding  the  use  of  the 
word  "bank"  by  any  institution  not  under  State  law.^^^  It 
was  not  until  1905  that  the  matter  was  once  more  urgently 
pressed  by  the  Auditor.  He  pointed  out  that  there  had  been 
twenty-five  failures  of  private  banks  in  the  biennium  from 
June  30,  1903,  to  June  30,  1905,  as  against  eight  among  the 
State  supervised  banks,  although  the  latter  were  more 
numerous.^®^ 

The  war  against  unregulated  private  banking  has  also 
been  carried  on  by  the  Iowa  Bankers  Association.  At  its 
fourth  annual  convention  in  1890  the  ''Finn  Bill"  to  regu- 
late private  banks  and  bring  them  under  the  same  State 
supervision  as  incorporated  banks  was  warmly  debated. 
Certain  members  were  in  favor  of  having  the  convention 


166  HISTORY   OF   BANKING   IN   IOWA 

endorse  the  measure;  but  the  private  bankers  contended 
that  the  bill  was  backed  by  a  desire  to  tax  the  private  banker 
more  heavily.  They  insisted  that  most  private  banks  were 
as  sound  as  any  other  type.  The  advantage  of  the  personal 
relation  and  of  unlimited  individual  liability  was  cited. 
They  pointed  out  that  because  of  freedom  from  restrictions 
they  could  make  more  money  as  private  bankers.  The 
private  bankers  were  strong  enough  to  carry  their  point  and 
no  action  followed  the  discussion.^^^ 

A  year  later  the  question  was  again  a  leading  subject  for 
discussion.  In  a  paper  on  ' '  The  Feasibility  of  State  Control 
and  Examination  of  Private  Banks",  H.  D.  Copeland,  State 
Bank  Examiner  from  Chariton,  held  that  State  examination 
was  not  feasible.  He  claimed  that  this  would  involve  going 
over  a  man's  entire  assets,  since  the  amount  for  which  he 
was  liable  was  unlimited.  Moreover,  he  charged  that  the 
failure  on  the  part  of  banks  to  incorporate  was  due  to  the 
defects  of  the  State  bank  laws,  although  he  felt  that  incor- 
porated banks  were  gaining  in  public  confidence  by  examina- 
tion and  publicity.  At  the  same  meeting  a  resolution  stating 
that  the  Association  believed  it  expedient  for  the  State  to 
exercise  such  supervision  over  the  private  banks  of  the 
State  as  would  properly  protect  the  interests  of  depositors 
and  customers  was  laid  on  the  table  after  prolonged  dis- 
cussion.^^''' 

In  1912  the  question  was  broached  again  by  E.  J.  Curtin 
in  his  address  as  President  of  the  Association.  He  took  the 
ground  that  all  organizations  bearing  the  name  bank  should 
be  regulated  by  State  or  national  laws.  An  objection  had 
been  raised  by  some  members  that  the  Iowa  Bankers  Asso- 
ciation had  taken  the  private  bankers  into  the  Association 
and  was  now  using  their  money  to  fight  them.  Mr.  Curtin 
took  the  stand  that  the  proposed  action  was  in  the  interest 
of  the  private  banker.  If  a  committee  of  bankers  friendly 
to  banks  did  not  draw  up  a  fair  bill,  he  was  convinced  that 


DEVELOPMENT  OF  BANKING  167 

unfriendly  outside  interests  would  take  action.  He  met  the 
general  opposition  to  State  regulation  with  sound  argu- 
ments.   He  said  in  part: 

Public  opinion,  however,  is  gradually  settling  to  the  fact,  that 
banking  is  not  a  private  business.  That  the  use  of  the  name  bank, 
has  through  the  course  of  time  come  to  mean  something,  and  that  if 
the  assets  of  a  bank  are  good,  inspection  and  investigation  will  not 
hurt  them ;  whereas,  if  they  are  not  good,  they  most  certainly  need 
both,  very  badly.  Many  private  banks  are  as  good  as  the  incorpo- 
rated ones,  and  as  well  conducted,  but  it  is  a  well  established  fact, 
that  when  a  private  bank  does  close  it  does  not  do  so,  until  about 
all  that  is  left,  of  any  value,  is  the  walls."^^ 

Bills  have  frequently  been  introduced  in  the  legislature 
for  the  purpose  of  requiring  private  banks  to  incorporate  or 
submit  to  State  supervision.^^^  In  this  respect  other  States 
have  been  in  advance  of  Iowa,  although  the  regulations  have 
been  of  comparatively  recent  origin.  In  1882  New  York 
prohibited  unincorporated  firms,  doing  a  banking  business, 
from  using  a  corporate  title.  This  regulation  has  since  been 
adopted  by  other  States.  Various  forms  of  restriction  on 
the  use  of  the  word  "bank"  have  been  adopted  by  several 
of  the  States.  By  January,  1919,  sixteen  States  had  re- 
quired private  banks  to  submit  to  the  same  regulation  and 
supervision  as  State  banks.  Several  States  require  bonds 
of  all  private  bankers  who  accept  deposits.  In  1910  the  laws 
of  California,  Colorado,  South  Dakota,  Idaho,  Indiana, 
Kansas,  Mississippi,  Missouri,  New  Jersey,  Oregon,  and 
Utah  required  that  private  bankers  have  a  specified  mini- 
mum capital.  There  are  difficulties  in  the  way  of  enforcing 
such  a  regulation  since  the  private  banker  is  frequently  en- 
gaged in  other  business  enterprises  and  finds  it  difficult  to 
separate  his  banking  from  his  other  interests.  But  some 
States  go  so  far  in  this  respect  as  to  make  the  private  bank 
essentially  a  corporation.  At  least  a  third  of  the  States 
have  followed  the  example  set  by  North  Dakota  in  1890  of 


168  HISTORY    OF    BANKING    IN    IOWA 

forbidding  private  individuals  to  engage  in  the  banking 
business,^"*^ 

Restrictive  legislation  on  private  banks  in  Iowa  was  en- 
acted by  the  General  Assembly  in  1919,  making  it  a  misde- 
meanor punishable  by  heavy  fines  or  imprisonment  or  both 
for  a  new  private  bank  to  use  as  part  of  its  name  the  word 
**  'Bank',  'Banking',  'Banker',  or  any  derivative,  plural  or 
compound  of  the  word  'Banking',  or  word  or  words  in  a 
foreign  language  having  the  same  or  similar  meaning". 
The  restriction  is  against  the  use  of  these  words  in  any  sign, 
letterheads,  bank  paper,  or  other  manner  which  would  in- 
dicate to  the  general  public  that  the  institution  is  a  bank. 
The  law  does  not,  however,  apply  to  private  banks  already 
in  existence  when  the  act  was  passed.  Although  this  enact- 
ment is  a  step  in  the  right  direction,  it  does  not  yet  meet 
the  requirements  that  should  govern  the  operation  of  newly 
organized  private  banks,  nor  does  it  suflQciently  provide 
regulation  for  those  already  in  existence.^^^ 

STATISTICS  OF  IOWA  BANKING 

Comparative  statistics  of  banking  show  that  Iowa  leads 
all  the  States  of  the  Union  in  number  of  banks.  When  the 
National  Monetary  Commission  secured  a  special  report 
from  all  banks  on  April  28,  1909,  Iowa  had  a  total  of  1365 
banks  of  all  classes.  Illinois  was  second  with  1263  banks.^"^ 
The  Comptroller  regularly  secures  reports  from  such  banks 
as  will  file  statements  with  him.  Since  this  is  voluntary  on 
the  part  of  some  of  the  banks,  the  data  are  not  complete. 
Incomplete  data  given  in  the  Comptroller's  reports  indicate 
that  Iowa  still  retains  first  place.^^^  The  lists  of  banks  com- 
piled by  the  secretary  of  the  Iowa  Bankers  Association,  the 
Bankers  Directory,  and  the  Federal  Reserve  Board  are  the 
most  complete  and  up-to-date  statistics  available.  The  latest 
figure  published  by  the  Iowa  Bankers  Association,  under 
date  of  June  1,  1920,  placed  the  total  number  of  banks  at 


DEVELOPMENT  OF  BANKING  169 

1919;*"^  the  Bankers  Directory  published  by  Rand  McNally 
and  Company  listed  1941  Iowa  banks  in  January,  1921;  the 
Federal  Reserve  Board  included  1930  Iowa  banks  on  the 
exchange  list  on  June  1,  1920.  This  was  forty-seven  more 
than  were  listed  in  Illinois,  the  State  ranking  second  in 
numbers. ^"^ 

In  total  banking  resources  Iowa  ranked  tenth  in  the  list  of 
States,^*'^  falling  just  under  a  billion  dollars  in  June,  1918. 

The  growth  in  number  of  banks  of  the  various  classes  in 
Iowa  can  best  be  seen  by  reference  to  Table  IV  and  Chart 
III.  In  1875  there  were  only  123  authorized  banks  in  Iowa ; 
in  1918  there  were  1665.  Private  banks,  after  an  increase  of 
approximately  two  hundred  and  fifty  per  cent,  reached  a 
maximum  of  534  in  1900  and  have  declined  to  about  the 
number  in  existence  in  1875.  Practically  half  of  the  Iowa 
banks  are  incorporated  under  the  savings  bank  law.  Na- 
tional and  State  banks  in  Iowa  are  almost  identical  in 
number. 

Data  regarding  the  resources  of  private  banks  are  so 
incomplete  that  no  historical  figures  on  their  total  resources 
are  possible.  Tables  III  and  V  show  the  banking  capital, 
deposits,  and  total  assets  of  the  authorized  State  banks  and 
national  banks  separately.  The  total  resources  of  each 
class  are  also  shown  graphically  in  Chart  I.  The  remark- 
able growth  of  banking  resources  in  the  past  twenty  years 
is  especially  noticeable.  It  might  also  be  noted  that  during 
this  time  many  private  banks  have  been  converted  into  na- 
tional, State,  or  savings  banks  so  that  the  aggregate  in- 
crease in  banking  resources  is  somewhat  less  than  is  indi- 
cated by  these  statistics  of  authorized  banks. 

As  may  be  noted  from  Tables  III  and  V  the  growth  of 
banking  resources  was  greatly  accelerated  by  the  "World 
War  and  continued  for  some  months  thereafter.  Data  are 
available  for  the  State  and  savings  banks  showing  at  fre- 
quent intervals  the  rapidly  changing  condition  of  the  banks 


170 


HISTORY   OF    BANKING   IN   IOWA 


h 
< 

o 


(A 

D 

g 
u 

X 

I- 

li. 
o 


7 

1 

< 

o 

m 

li. 

z 

o 

to 

ft:uj 

iij 

(0 

UJ 

(n 

I< 

D  J 

2Q 

o  o  o 
S  2  o 
2      <^       00 


o 
o 


o      o 


o       c       o 
o       o       o 

CO        cu        - 


I 

-J 
< 


(L  Z  VD  CO 


\ 


^X5^       O 

S      o      2 

O        0^        CO 


\ 


\ 


/   \ 


\ 


rr 

•\\ 


\'v 


\r 


H 


i^ 


1\ 


T 


11 


I  il 


^5  o  o  6  o  o  o 
o  o  o  o  o  o  o 
r^      vo      *'>      ^      ^      w      — 


DEVELOPMENT  OF  BANKING 
Table  IV 


171 


Number  of 

Banks  in  Iowa,  1875-1920*°^ 

Year 

Total 
Number 

OF 

Banks 

Authorized  Banks 

Pri- 
vate 
Banks 

Total 

Number 

Nation- 
al 
Banks 

State  Supervised 

Total 
Number 

State 
Banks 

Sav- 
ings 
Banks 

Loan 

AND 

Trust 
Cos. 

1875 

322 

123 

81 

42 

23 

19 

199 

1876 

78 

1877 

329 

128 

78 

50 

31 

19 

201 

1878 

76 

32 

232 

1879 

378 

126 

73 

53 

33 

20 

252 

1880 

75 

32 

264 

1881 

418 

129 

76 

53 

31 

22 

289 

1882 

88 

40 

380 

1883 

539 

186 

110 

76 

48 

28 

353 

1884 

123 

49 

373 

1885 

592 

209 

125 

84 

50 

34 

383 

1886 

158 

59 

388 

1887 

641 

230 

128 

102 

65 

37 

411 

1888 

678 

245 

129 

116 

74 

42 

423 

1889 

719 

263 

133 

130 

80 

50 

456 

1890 

788 

303 

139 

164 

105 

59 

485 

1891 

838 

356 

151 

205 

122 

83 

482 

1892 

884 

406 

161 

245 

141 

104 

478 

1893 

968 

494 

169 

325 

177 

148 

474 

1894 

979 

519 

169 

350 

188 

162 

460 

1895 

995 

531 

167 

364 

194 

170 

464 

1896 

1013 

536 

166 

370 

201 

477 

1897 

1014 

537 

165 

372 

206 

166 

477 

1898 

1041 

551 

168 

383 

209 

490 

1899 

1093 

574 

172 

402 

207 

195 

519 

1900 

1178 

644 

196 

448 

214 

534 

1901 

1216 

695 

221 

474 

218 

256 

521 

1902 

1241 

761 

230 

531 

230 

480 

1903 

1320 

827 

253 

574 

238 

336 

493 

1904 

1372 

888 

269 

619 

244 

484 

1905 

1396 

958 

281 

677 

248 

429 

438 

1906 

1480 

1042 

297 

745 

251 

494 

438 

1907 

1515 

1116 

304 

812 

259 

399 

1908 

1546 

1164 

319 

845 

261 

571 

13 

382 

1909 

1564 

1218 

320 

898 

282 

356 

1910 

1622 

1277 

326 

951 

272 

663 

15 

345 

1911 

1659 

1313 

329 

984 

346 

1912 

1685 

1354 

338 

1016 

281 

721 

14 

331 

1913 

1728 

1408 

340 

1068 

320 

1914 

1755 

1457 

343 

1114 

304 

791 

19 

298 

1915 

1801 

1519 

348 

1171 

282 

1916 

1843 

1570 

353 

1217 

331 

865 

21 

273 

1917 

1880 

1618 

351 

1267 

343 

899 

25 

262 

1918 

1917 

1662 

353 

1309 

363 

923 

25 

255 

1919 

1916 

1675 

355 

1320 

371 

926 

23 

241 

1920 

1923 

1704 

358 

1346 

389 

934 

23 

219 

172  HISTORY    OF   BANKING    IN   IOWA 

during  the  period  of  unusual  prosperity  and  the  first  effects 
of  the  crisis  of  1920  upon  bank  resources.  Abstracts  of  the 
reports  of  the  State  and  savings  banks  show  that  the  high 
water  mark  for  total  assets  was  reached  in  the  early  months 
of  1920.  On  April  2,  1920,  the  State  supervised  banks  re- 
ported total  assets  of  $839,413,141 — an  increase  of  $120,- 
091,046  over  the  figure  shown  at  the  corresponding  call  in 
1919.  The  lour  reports  made  during  the  remaining  months 
of  1920  show  that  liquidation  was  under  way.  At  the  No- 
vember call  the  total  assets  were  higher  than  in  September, 
but  this  may  be  explained  as  a  normal  seasonal  condition. 
All  the  reports  show  a  gain  in  resources  over  the  corre- 
sponding date  in  the  previous  year,  but  the  difference  of 
$120,000,000  of  April,  1920,  over  March,  1919,  had  dwindled 
by  December  31,  1920,  to  a  difference  of  $7,855,718  as  com- 
pared to  December  31,  1919.  In  1921  liquidation  continued 
•  and  the  first  report  (March  22,  1921)  showed  a  decline  of 
about  $75,000,000  in  total  resources  from  the  high  tide  of 
1920. 

Similar  detailed  data  are  not  available  for  the  national 
banks.  The  figures  in  Table  III  are  for  about  October  first 
of  each  year.  From  this  it  may  be  seen  that  the  total  re- 
sources had  nearly  doubled  in  five  years.  The  figure  for 
1920  is  considerably  higher  than  that  for  1919.  This  is  in 
line  with  the  situation  reported  for  State  incorporated 
banks.  On  the  whole  the  assumption  may  be  made  that  the 
fluctuations  in  State  banks  are  representative  of  the  general 
banking  situation  during  this  period. 

The  chief  decline  in  banking  assets  during  the  year  are 
found  to  be  in  the  loan  and  reserve  items.  Loans  and  dis- 
counts were  reduced  over  $30,000,000  and  cash  in  vault  and 
other  reserve  items  by  over  $37,000,000.  In  normal  times 
the  loans  and  discounts  increase  or  decrease  in  close  relation 
to  the  deposits,  but  during  a  commercial  crisis  the  deposits 
are  drawn  down  more  rapidly  than  the  loans  can  be  liqui- 


DEVELOPMENT  OF  BANKING 
Table  V 


173 


Number, 

Deposits,  Capital  Stock,  and  Total  Assets  of  State 

AND  Savings  Banks  and  Trust 

Companies  in  Iowa,  1875-1921*°* 

Date 

Number 

Deposits 

Capital  Stock 

Total  Assets 

1875 

42 

S       3,959,000 

$            2.063.000 

$                6,486.000 

1877 

50 

3,985,000 

2.416.000 

7,091.000 

1879 

53 

4,900,000 

2,321,000 

7,829,000 

1881 

53 

9,667,000 

2,456,000 

12.735,000 

1883 

76 

11,200,000 

3,701,000 

15,846,000 

1885 

84 

11,639,000 

4,541,000 

17,480,000 

1887 

102 

15,716.000 

5,708,000 

22,942,000 

1888 

106 

18.435,000 

6,666.000 

27,212,000 

1889 

130 

20,396.000 

7,673,000 

30,355,000 

1890 

164 

25,773,000 

8,824,000 

37,489,000 

1891 

205 

33.781.000 

11,026,000 

48,254,000 

1892 

245 

42.476,000 

12,734,000 

59,011.000 

1893 

325 

42,151,000 

14,484,000 

60,854,000 

1894 

350 

41.987,000 

15,671,000 

61,271,000 

1895 

364 

43,827,000 

16,161,000 

64,045,000 

1896 

370 

43,955,000 

16.411.000 

64,626,000 

1897 

372 

45,442.000 

16,287.000 

65,799,000 

1898 

383 

59.336.000 

16,447,000 

79,697,000 

1899 

402 

77.405,000 

16,874,000 

98,704,000 

1900 

448 

91,147,000 

16,054,000 

114.392.000 

1901 

474 

114,731,000 

18,845,000 

139,554,000 

1902 

531 

133,692,000 

20,205,000 

160,711,000 

1903 

574 

132,443,000 

21,315.000 

161,462,000 

1904 

619 

131,471,000 

22,329.000 

161,676,000 

1905 

677 

146.493.000 

24,096.000 

179,679,000 

1906 

745 

169.609.000 

25,699,000 

205,145,000 

1907 

812 

201,953,000 

28,010.000 

241,512,000 

1908 

845 

197,927,000 

28,604,000 

239,340,000 

1909 

898 

225,155.000 

30,578,000 

269,730,000 

1910 

951 

246,921,000 

32,478,000 

296,673,000 

1911 

984 

249,829,000 

33,901,000 

306,680.000 

1912 

1016 

278.761.000 

35,982,000 

336.742,000 

1913 

1068 

304,794.000 

37,895.000 

368.819,000 

1914 

1114 

314.129.000 

39,918,000 

383,784,000 

1915 

1171 

325,812,000 

41.834,000 

398,503,000 

1916 

1217 

359,282,000 

43,866,000 

436,461,000 

1917 

1254 

447,054,000 

45,196,000 

526,652.000 

1918 

1309 

496,506.000 

48,407,000 

584,588,000 

1919 

1320 

599.879,000 

49,546,000 

696,565,000 

1920 

1346 

657,886,000 

53,816.000 

800,862,000 

1921* 

1356 

586,079,000 

55.909.000 

764,414,000 

♦  Marc 

li  22,  1921 

174 


HISTORY    OF   BANKING   IN   IOWA 


dated.  An  analysis  of  the  data  for  Iowa  banks  shows  that 
while  loans  declined  only  $30,000,000,  deposits  dropped 
almost  $120,000,000.  The  extent  to  which  this  increased  the 
volume  of  rediscounting  is  shown  in  Chapter  X.  The  effect 
of  the  strain  upon  the  number  of  bank  failures  is  shown  in  a 
later  section  of  this  chapter. 

The  banks  are  not  classified  according  to  capital  in  the 
regular  reports  published  by  the  Comptroller  or  the  State 
banking  department,  but  such  a  classification  was  made  in 
the  report  of  the  National  Monetary  Commission  in  1909 
and  is  presented  in  Table  VI.  There  are  one  or  two  incon- 
sistencies in  this  report.  For  example,  there  are  twenty-two 
State  banks  listed  as  having  capital  stock  of  less  than 
$25,000.  Three  savings  banks  are  said  to  have  no  capital. 
Both  of  these  conditions  would  be  contrary  to  State  law.  If 
we  accept  the  figures  as  given,  some  interesting  facts  are 
revealed.  Five  hundred  banks  are  seen  to  have  had  a  capital 


Table  VI 

Classification  of  Iowa  Banks  According  to  Capital 

,  April 

28,  1909,  BY  Types  op  Banks"" 

Total 

Nation- 

Total 

Loan 

Capital 

Number 

al 

Exclud- 

State 

Savings 

AND 

Private 

OF 

Banks 

ing 

Banks 

Banks 

Trust 

Banks 

Banks 

Nat'l 

Cos. 

$10,000  or  less 

281 

281 

10 

177* 

94 1 

10.000-24,900 

219 

219 

12 

172 

1 

34 

25,000 

296 

92 

204 

108 

77 

19 

25,100-49,900 

124 

22 

102 

50 

42 

10 

50,000-99,900 

306 

134 

172 

80 

72 

7 

13 

100,000-249,900 

125 

65 

60 

21 

27 

4 

8 

250,000-999,900 

13 

5 

8 

1 

5 

2 

1,000,000 

1 

1 

Total 

1365 

319 

1046 

282 

572 

14 

178 

*  Includes  three  banks  having  no  capital. 

t  Includes  nine  banks  having  no  capital. 

DEVELOPMENT  OF  BANKING  175 

of  less  than  $25,000 — the  minimum  amount  permitted  for 
national  banks.  Only  one  hundred  and  thirty-nine  Iowa 
banks  had  a  capital  of  $100,000  or  over,  and  only  one  reached 
the  $1,000,000  mark. 

CLEAEING  HOUSE  ASSOCIATIONS 

Des  Moines  banks  appear  to  have  been  the  first  in  Iowa 
to  organize  a  clearing  house  association.  Its  formal  organi- 
zation dates  from  December  5, 1887,  although  it  had  cleared, 
informally,  a  few  days  earlier. ^^^  In  Sioux  City  twelve 
banks  associated  on  July  14,  1889,  to  form  the  Sioux  City 
Clearing  House.  The  Davenport  Clearing  House  Associa- 
tion was  organized  in  August,  1895.^^^  The  Cedar  Rapids 
association  adopted  a  constitution  and  by-laws  on  November 
6,  1902,  but  did  not  begin  the  actual  work  of  clearing  until 
January  4,  1904.^^^  Dates  of  the  organization  of  the  other 
Iowa  associations  are  not  available,  but  it  is  of  record  that 
the  Council  Bluffs  association  was  also  active  during  the 
panic  of  1907. 

Data  regarding  clearing  houses  in  Iowa  cities  are  difficult 
to  present  satisfactorily  because  often  no  formal  organiza- 
tion exists.  The  list  of  towns  having  recognized  clearing 
houses  at  present  includes  Cedar  Rapids,  Council  Bluffs, 
Clinton,  Davenport,  Des  Moines,  Dubuque,  Estherville,  Fort 
Dodge,  Iowa  City,  Mason  City,  Muscatine,  Osage,  Sioux 
City,  and  Waterloo.  Osage,  the  smallest  of  these  towns, 
had  less  than  3000  population  in  1915,  and  had  but  four 
banks.  On  the  other  hand,  several  of  the  larger  cities  of  the 
State  are  not  included  in  the  list.  But  many  cities  having  no 
recognized  organization  have  some  designated  place  where 
the  exchange  of  checks  is  made  each  morning.  None  of 
the  Iowa  clearing  houses  make  examinations  of  their  mem- 
bers.^13 

Statistics  of  the  volume  of  clearings  and  other  activities 
of  clearing  house  associations  are  published  in  the  annual 


176 


HISTORY    OF    BANKING    IN   IOWA 


reports  of  the  Comptroller  of  the  Currency.  Although  re- 
ports are  not  secured  from  all  of  the  clearing  houses,  the 
exchanges  of  those  reporting  from  Iowa  are  given  in  Table 
VII. 

Table  VII 


Exchanges  in  Iowa  Clearing  Houses*^* 

Exchanges  fob 

Exchanges  fob 

Exchanges  for 

Clearing  House 

YEAR  ending 

YEAR  ending 

YEAR   ending 

Sept.  30.  1920 

Sept.  30.  1919 

Sept.  30,  1918 

Des  Moines 

$     660,067,000 

$     528.019.000 

$     489.694.000 

Sioux  City 

542,135,000 

517.577,000 

430.718,000 

Davenport 

596,537,000 

455.987.000 

132,922.000 

Cedar  rapids 

156,979,000 

120,714.000 

109.432.000 

Waterloo 

109,812.000 

88.755.000 

112.062.000 

Dubuque 

74,821.000 

59,058.000 

49,641.000 

Muscatine 

36,727,000 

28.597,000 

23.268.000 

Iowa  City 

47,782,000 

26.075.000 

20.274.000 

Osage 

5,482.000 

5.064.000 

In  the  crisis  of  1907  the  clearing  house  associations  of 
several  Iowa  cities,  following  the  example  set  by  the  associa- 
tions in  the  financial  centers,  united  to  meet  the  financial 
strain.  At  the  outbreak  of  the  panic,  Auditor  B.  F.  Carroll 
sent  a  circular  letter  to  the  Iowa  bankers  stating  that  the 
department  would  permit  temporarily  considerable  latitude 
as  to  reserve  requirements  and  other  restrictions.  He  ad- 
vised the  bankers  to  take  the  depositors  into  their  confi- 
dence, but  suggested  limiting  the  amount  of  cash  payments 
to  depositors  if  necessary.  The  Federal  Comptroller  of  the 
Currency  also  tolerated  restriction  of  payments  in  the  na- 
tional banks,  although  he  gave  no  explicit  assent  to  the  prac- 
tice. The  larger  cities  of  the  State  immediately  took  action 
to  limit  their  payments  and  create  substitutes  for  cash  dur- 
ing the  period  of  the  panic,  but  the  record  of  the  extent 
to  which  this  was  done  is  quite  fragmentary.    Data  were  se- 


DEVELOPMENT  OF  BANKING  177 

cured  on  this  point  shortly  after  the  panic  and  these  were 
later  published  by  the  National  Monetary  Commission.  This 
study  shows  that  the  Cedar  Rapids,  Council  Bluffs,  Daven- 
port, Des  Moines,  and  Sioux  City  clearing  houses  imposed 
cash  restrictions  and  made  use  of  some  kind  of  currency 
substitutes.  Clearing  house  loan  certificates  and  cashiers 
checks  in  convenient  denominations  for  general  circulation 
were  the  forms  used  by  the  Iowa  associations.  Undoubtedly 
there  were  other  towns  or  cities  where  restrictions  were  im- 
posed, but  the  general  situation  in  Iowa  was  sound  and  little 
alarm  was  manifested  by  the  people  generally.  J.  N.  Dar- 
ling— *'Ding" — in  a  cartoon  published  in  the  Des  Moines 
Register  and  Leader  depicted  the  frightened  banker  leading 
the  old  mare  labeled  ''Public  Confidence"  past  the  financial 
jack-o-lantern.  Old  Dolly  did  not  ''bat  an  eye"  throughout 
the  ordeal,  but  when  safely  past  was  reproached  for  causing 
no  end  of  trouble  by  losing  her  head  in  that  way.  This  fairly 
reflected  the  situation  in  the  State.  Iowa  farmers  were 
so  busy  piling  up  the  golden  corn  at  good  prices  that  they 
were  not  seriously  concerned  about  the  shortage  of  gold  in 
the  vaults  of  metropolitan  banks.*^^ 

BANK  FAILUEES 

A  record  of  the  number  of  bank  failures  and  the  losses 
sustained  by  depositors  would  be  of  interest  if  complete 
data  were  available.  The  record  for  the  national  banks  is 
complete  up  to  October  30, 1920,  and  is  shown  in  Table  VIII. 
It  will  be  seen  that  there  have  been  seventeen  failures. 
Within  the  past  few  months  three  other  failures  have  been 
reported  but  the  data  for  them  are  incomplete.  Of  those 
shown  in  the  table  the  First  National  Bank  of  Ida  Grove  had 
already  gone  into  voluntary  liquidation,  and  the  First  Na- 
tional of  Sioux  City  was  restored  to  solvency.  In  the  case 
of  the  failure  at  Ida  Grove  the  record  does  not  show  any 
pajnnents  to  depositors  after  the  bank  had  been  placed  in 

12 


178 


HISTORY    OF    BANKING   IN   IOWA 
Table  Vin 


National  Bank  Failures  in  Iowa  from  1865 

TO  October  30, 

1920"« 

Per 

Date  or 

Capital 

Claim* 

Dividends 

CENT 

Loss  to 

Bank 

Failure 

Stock 

Proved 

Paid 

Divi- 
dends 
Paid 

Deposi- 
tors 

Keoxuk 

1st  Nat'l 

Mch.  3.1868 

$     100.000 

S     205,256 

$      134,929 

68.33 

$       70.327 

Bedford 

1st   Nat'l 

Feb.    1,1876 

30.000 

56,457 

12,624 

22.50 

43.833 

Osceola 

1st  Nat'l 

Feb.  25,1876 

50,000 

34,535 

34,536 

100.00 

Dubuque 

Com'l  Nat'l 

Apr.    2,1888 

100.000 

435,319 

248 , 132 

57.00 

187 . 187 

Cedar  Falls 

1st  Nat'l 

June  13.1893 

50,000 

126,411 

75,969 

58.50 

50.442 

Ida  Grove 

1st    Nat'l* 

June   4,1895 

150.000 

Pblla 

1st  Nat'l 

June   5.1895 

50,000 

61.853 

39,969 

64.62 

21.884 

Sioux  City 

Sioux  Nat'l 

Sept.  9,1896 

300,000 

146,199 

114,035 

78.00 

32,164 

Decorah 

1st  Nat'l 

Nov.24,1896 

75,000 

224,862 

104,551 

46.50 

120,311 

Sioux  City 

1st    NAT'Lt 

Jan.     7.1897 

100.000 

Griswold 

1st  Nat'l 

Feb.  17.1897 

50,000 

58,906 

44,866 

82.00 

14,040 

LeMarb 

LeMabb 

Nat'l 

Apr.  17,1901 

100,000 

122.403 

75,971 

60.00 

46,432 

Storm  Lake 

1st  Nat'l 

Jan.    2,1904 

50,000 

139.455 

37,786 

29.00 

101,669 

Grinnell 

1st  Nat'l 

July  27,1904 

100,000 

337.215 

290.220 

86.00 

46.995 

Chariton 

1st  Nat'l 

Oct.  31,1907 

50,000 

1.311,365 

628.121 

47.87 

683.244 

Carroll 

1st  Nat'l 

Oct.  21.1908 

100,000 

406,276 

257,708 

63.10 

148.568 

Corning 

1st  Nat'l 

June  22,1914 

50,000 

236,241 

163,718 

69.35 

72.523 

Total 

$1,505,000 

$3,903,753 

$2,263,135 

$1,639,418 

*  Former 
t  Restore! 

y  in  volimtaj 
i  to  solvency 

■y  liquidation. 

DEVELOPMENT  OF  BANKING  179 

the  hands  of  the  receiver.  The  First  National  Bank  of 
Osceola  paid  the  depositors  in  full.  Losses  to  depositors 
have  been  considerable  in  the  aggregate,  although  very- 
small  when  compared  to  the  total  amount  which  has  been  on 
deposit  throughout  this  period. 

The  record  for  the  State  supervised  banks  is  not  so  com- 
plete. The  only  satisfactory  data  available  cover  the  period 
since  1892,  and  hence  include  the  panics  of  1893  and  1907. 
Aside  from  the  number  of  failures,  little  information  is 
available.  In  1892  there  were  no  failures,  but  during  the 
summer  of  1893  four  banks  failed  and  a  number  of  others 
suspended  temporarily.  During  the  two  years  following 
there  were  no  failures,  but  in  1896  and  1897  six  bank  fail- 
ures were  noted.  In  the  biennium  following  three  failures 
were  reported.  One  liquidation — whether  or  not  to  be 
classed  as  a  failure  is  not  clear — occurred  in  1900-1901.  In 
the  next  few  years  the  number  of  failures  increased  some- 
what: two  in  1903,  four  in  1904,  two  in  1905,  one  in  1906, 
and  four  in  1907.  During  the  eleven  years  from  November 
1907,  to  June,  1918,  only  one  small  failure  was  reported. 
Thirteen  failures  were  reported  from  that  date  to  the  cor- 
responding period  in  1921. 

As  to  losses  the  data  show  that  for  the  thirteen  failures 
from  1903  to  1907,  four  banks  paid  the  depositors  in  full  and 
the  other  nine  an  average  of  seventy  per  cent.  In  1904,  a 
year  of  unusual  strain  on  banks  in  Iowa,  Bradstreet's 
agency  reported  that  the  difference  between  the  assets  and 
the  liabilities  of  the  four  State  supervised  banks  which 
failed  was  $269,000.^'^ 

As  for  the  private  banks,  the  data  available  are  not  even 
as  satisfactory  as  those  which  concern  the  State  supervised 
banks.  From  the  facts  pertaining  to  years  of  unusual  strain 
on  banks  it  is  safe  to  say,  however,  that  the  number  of  fail- 
ures and  the  losses  sustained  have  been  proportionately 
much  heavier  than  for  the  authorized  banks.  Figures  quoted 


180  HISTORY   OF    BANKING   IN   IOWA 

from  Bradford  and  Rhodes'  Bank  Directory  for  September 
1,  1893,  showed  a  total  of  thirty-one  Iowa  banks  closed  dur- 
ing the  panic  of  1893  (between  April  6  and  August  23, 1893). 
Of  this  number  seventeen  were  private  banks.  Of  the  four- 
teen suspensions  of  authorized  banks,  seven  had  already 
resumed  operation  by  September  1st;  but  none  of  the 
private  banks  are  reported  to  have  started  operations  again 
by  that  date.*^^  Again  during  the  period  of  strain  in  1904 
the  heavy  losses  were  in  the  private  banks.  In  the  year  end- 
ing December  31,  1904,  nineteen  banks  failed,  and  of  this 
number  fourteen  were  private  banks.  The  crisis  of  1920 
placed  a  heavy  strain  on  the  banks.  During  the  past  fifteen 
months  seventeen  banks  reported  to  have  closed  have  not 
been  able  to  resume  business.  Of  these,  eight  were  under 
State  supervision,  seven  were  private  banks,  and  two  were 
national  banks.  In  addition  to  these  there  have  been  two 
or  three  banks  which  closed  temporarily  but  have  since 
been  reorganized.  Possibly  some  of  the  remaining  ones 
may  be  restored  to  solvency,  but  it  is  not  unlikely  that  other 
suspensions  will  take  place  before  liquidation  is  completed. 
No  data  are  available  to  show  the  amount  of  the  losses.  The 
proportion  of  bank  failures  does  not  appear  to  be  high  in 
Iowa  as  compared  with  other  States.*^* 

Nearly  half  a  century  has  elapsed  since  the  foundations 
were  laid  for  the  present  banking  system.  In  the  early  sev- 
enties many  counties  in  Iowa  were  still  in  the  pioneer  stage. 
Incorporated  banks  had  not  entered  the  newer  sections; 
private  banks  were  still  the  dominant  type  in  the  State  as  a 
whole.  Banking  institutions  were  scattered  and  resources 
were  small.  The  remarkable  growth  in  the  number  of  banks, 
which  has  placed  Iowa  in  the  lead  of  all  the  States,  has  been 
accompanied  by  an  even  more  remarkable  growth  of  bank- 
ing resources.  In  1919  the  total  assets  of  the  1320  State 
supervised  banks  were  over  one  hundred  times  as  great  as 
those  of  the  forty-two  banks  of  1875.    During  the  same  time 


DEVELOPMENT  OF  BANKING  181 

the  national  banks,  older  and  more  numerous  at  the  outset 
of  this  period,  have  also  increased  nearly  twenty  fold. 
Private  banks  are  not  any  more  numerous  but  probably  have 
larger  aggregate  resources  than  they  had  fifty  years  ago. 

Consolidation,  with  a  resulting  development  of  larger  in- 
stitutions, is  a  tendency  which  has  recently  been  noticeable 
in  Iowa  banking.  Complete  statistics  of  mergers  are  not 
available,  but  in  the  biennial  period  covered  by  the  last  re- 
port of  the  State  Superintendent  of  Banking,  ten  State  in- 
corporated banks  were  merged  with  other  banking  institu- 
tions. An  even  larger  number  consolidated  in  the  preceding 
period.^2°  It  seems  likely  that  the  future  will  see  the  devel- 
opment of  more  big  banks  in  Iowa  and  not  such  a  rapid  in- 
crease in  numbers.  In  1919  there  were  one  hundred  and 
twenty  national  banks  in  the  country  having  assets  of  more 
than  $25,000,000.  These  were  distributed  in  thirty-nine 
cities  in  all  sections  of  the  nation,  but  no  Iowa  bank  had 
yet  attained  that  size,  the  largest  national  bank  in  the  State 
having  aggregate  resources  of  $23,157,724.^^^ 

One  effect  of  the  World  War  was  to  cut  down  the  rate  of 
increase  in  the  number  of  banks  and  to  accelerate  the  growth 
in  bank  resources.  This  may  be  attributed  in  general  to  the 
great  expansion  of  credit  the  country  over.  An  interesting 
by-product  of  the  war  psychology  was  manifested  in  the 
effort  of  banks  to  eliminate  any  trace  of  Teutonic  connec- 
tion. Twenty-one  State  banks  changed  their  names,  before 
July  1,  1918,  in  order  to  eliminate  the  word  ''German ".^22 

The  half  century  record  of  Iowa  banking  has  been  one  of 
distinct  progress  in  other  directions  besides  that  of  size. 
Thus,  the  high  integrity  of  the  men  in  the  banking  business 
is  attested  by  the  splendid  record  of  safety  which  has 
marked  the  recent  decades.  The  panic  of  1907  did  not  result 
in  heavy  losses  to  Iowa  depositors  and  while  data  for  the 
present  crisis  are  incomplete  they  do  not  show  a  high  per- 
centage of  failures  and  losses.    Moreover,  in  larger  measure 


182  HISTORY   OF    BANKING   IN   IOWA 

than  ever  before  the  Iowa  banker  is  reaching  out  for  oppor- 
tunities to  promote  the  business  of  his  community.  In  this 
manner  the  bankers  have  won  a  place  of  leadership  in  the 
commercial  development  of  the  State  commensurate  with 
the  increased  volume  of  their  material  resources. 


IX 
SUPERVISION  OF  BANKING 

The  supervision  of  banking  which  developed  before  the 
Civil  War  was  devised  primarily  to  protect  note  holders. 
With  the  establishment  of  the  national  banking  system,  how- 
ever, publicity  of  the  affairs  of  the  banks  was  also  provided 
in  the  interests  of  depositors  and  stockholders,  and  in  this 
respect  the  national  law  became  the  model  for  later  State 
legislation.  Two  general  methods  were  adopted  whereby 
the  public  interests  could  be  conserved :  reports  of  condition 
filed  by  the  banks  themselves  were  regularly  called  for ;  and 
periodic  examinations  by  disinterested  examiners  were  au- 
thorized. In  the  following  discussion  the  treatment  of  these 
two  forms  of  publicity  will  be  considered  separately. 

EEPOETS  FEOM  BANKS 

In  the  national  banking  act  as  revised  in  1864  regular 
quarterly  reports  from  the  banks  were  prescribed.  The 
dates  were  the  first  Mondays  of  January,  April,  July,  and 
October.  A  bank's  report  of  its  condition  was  to  be  a  de- 
tailed statement  of  the  resources  and  liabilities.  The  Comp- 
troller was  directed  to  publish  an  abstract  of  the  statements 
in  some  Washington  newspaper  and  to  require  the  indi- 
vidual banks  to  publish  their  statements  in  some  newspaper 
in  the  town  where  the  bank  was  located,  or,  in  case  no  paper 
was  published  there,  in  the  nearest  town  that  had  a  news- 
paper. In  addition  to  the  quarterly  statements,  a  monthly 
statement  of  the  loans  and  discounts,  cash  on  hand,  deposits, 
and  circulation  was  provided  for.^^s 

The  weakness  of  the  provisions  of  the  original  law  was 
that  it  specified  the  dates  upon  which  banks  were  to  make 

183 


184  HISTORY   OF   BANKING   IN   IOWA 

reports.  In  this  way  a  bank  could  prepare  for  the  periodic 
report  and  make  a  favorable  showing.  In  1869  the  law  was 
amended  to  meet  this  defect  and  to  place  still  greater  re- 
sponsibility upon  the  officers  for  the  correctness  of  the  state- 
ments. This  legislation  required  that  banks  make  five  re- 
ports annually  on  some  past  date  designated  by  the  Comp- 
troller. The  form  of  statement  was  to  be  prescribed  by 
the  Comptroller,  and  the  report  was  to  be  verified  by  the 
president  or  the  cashier  of  the  bank  and  three  of  the  di- 
rectors under  oath.  Five  days  were  allowed  the  banks  in 
which  to  submit  the  report  after  the  call  was  issued.  Proof 
of  publication  in  a  newspaper  of  the  town  had  to  be  fur- 
nished by  the  bank.  The  Comptroller  was  also  permitted 
to  call  for  special  reports  whenever  he  deemed  such  reports 
necessary.  Additional  reports  to  the  Comptroller  of  the 
amount  of  dividends  and  of  net  earnings  were  prescribed. 
These  were  to  be  made  within  ten  days  after  the  declaration 
of  each  dividend.  Delay  or  failure  to  submit  the  reports 
was  made  punishable  by  a  fine  of  $100  a  day.^^^ 

National  banks  have  also  been  required  to  make  a  semi- 
annual report  of  the  amount  of  notes  outstanding  January 
1st  and  July  1st.  These  reports  are  made  to  the  Treasurer 
of  the  United  States  and  are  for  the  purpose  of  levying  the 
tax  on  circulation  rather  than  for  the  protection  of  credit- 
ors.^^^  In  general  the  requirements  laid  down  in  this  early 
law  as  to  statements  and  reports  from  national  banks  have 
remained  unchanged  up  to  the  present  time. 

The  Auditor  of  State  was  the  officer  charged  with  the 
duty  of  supervising  State  chartered  banks  in  Iowa  prior  to 
1917.  Under  the  provisions  of  the  unused  free  banking  law 
of  1858  he  was  to  have  had  charge  of  the  note  issue,  and  to 
him  quarterly  reports  of  conditions  were  to  have  been  made. 
Three  bank  commissioners  were  also  provided  for,  who  were 
expected  to  make  examinations  and  exercise  general  super- 
vision.'*^^    In  1860  the  first  law  calling  for  reports  from 


SUPERVISION  OF  BANKING  185 

banks  not  carrying  on  the  function  of  note  issue  was  placed 
on  the  statute  books.  This  act  required  all  associations  in- 
corporated under  the  general  incorporation  laws  of  the 
State  to  make  regular  reports  of  their  condition  to  the  Audi- 
tor of  State.  The  dates  for  these  reports  were  the  first  Mon- 
day in  January,  April,  July,  and  October.  The  prescribed 
statements  were  required  to  contain  the  following  items  of 
information : 

1.  The  amount  of  the  capital  stock  actually  paid  in,  and  then 
remaining  as  the  capital  of  such  association. 

2.  The  amount  of  debts  of  every  kind  due  to  banks,  bankers  or 
other  persons,  other  than  regular  depositors. 

3.  The  total  amount  due  depositors,  including  sight  and  time 
deposits. 

4.  The  amount  subject  to  be  drawn  at  sight,  then  remaining  on 
deposit  with  solvent  banks  or  bankers  of  the  country,  specifying 
each  city  or  town  and  the  amount  deposited  in  each  and  belonging 
to  such  association. 

5.  The  amount  of  gold  or  silver  coin  and  bullion  belonging  to 
such  association  at  the  time  of  making  the  statement. 

6.  The  amount  then  on  hand,  of  bills  of  solvent  specie  paying 
banks. 

7.  The  amount  of  bills,  bonds,  notes  and  other  evidences  of  debt, 
discounted  or  purchased  by  such  association,  and  then  belonging  to 
the  same,  specifying  particularly  the  amount  of  suspended  debts, 
the  amount  considered  good,  the  amount  considered  doubtful,  and 
the  amount  in  suit  or  judgment. 

8.  The  value  of  real  or  personal  property  held  for  the  con- 
venience of  such  associations,  specifying  the  amount  of  each. 

9.  The  amount  of  the  undivided  profits  (if  any)  then  on  hand. 

10.  The  total  amount  of  all  liabilities  to  such  associations  on 
the  part  of  the  directors  thereof  .^^'^ 

The  law  did  not  require  the  Auditor  to  publish  statements 
of  the  condition  of  the  banks :  the  reports  were  merely  filed 
in  the  Auditor's  office.^^^  He  had  no  way  of  knowing  what 
institutions  were  incorporated.  Consequently  he  was  unable 


186  HISTORY    OF    BANKING    IN    IOWA 

to  call  on  them  for  statements  in  case  tkey  did  not  comply 
with  the  law.  As  shown  in  an  earlier  chapter,  banks  in- 
corporated under  the  general  incorporation  laws  existed 
even  before  1860 ;  but  the  data  concerning  them  is  scattered 
through  the  offices  of  the  county  recorders  with  whom  they 
filed  their  articles  of  incorporation. 

Provisions  of  the  law  of  1860  with  some  modifications 
were  reenacted  in  the  Code  of  1873.  Before  being  allowed  to 
begin  operations  the  stockholders  of  a  bank  were  required 
to  secure  a  certificate  from  the  Auditor  authorizing  them 
to  commence  business,  and  this  was  not  to  be  issued  until 
the  Auditor  had  satisfied  himself  that  the  association  had 
complied  with  the  minimum  capital  requirements  laid  down 
in  the  Code.  The  fixed  date  for  submitting  reports  was 
dropped,  and  the  plan  of  the  national  system  of  calling  for 
reports  on  some  past  day  was  substituted  therefor.  The 
number  of  reports  per  year  was  limited  to  four.  So  far  as 
the  content  of  the  reports  was  concerned  no  change  was 
made;  even  the  obsolete  section  regarding  the  amount  of 
bills  of  "solvent  specie-paying  banks"  was  included.^ ^^ 

The  Auditor  was  required  to  publish  the  reports  in  some 
newspaper  of  the  county  in  which  the  bank  was  located.  He 
was  not  specifically  directed  to  make  a  statement  of  the 
condition  of  banks  in  his  biennial  report ;  but  Auditor  John 
Russell,  after  calling  for  reports  from  all  banks  that  had 
their  articles  recorded  in  the  office  of  the  Secretary  of  State 
under  the  provisions  of  an  act  of  1870,  made  a  synopsis  of 
the  reports  received  on  September  26,  1873,  which  he  pub- 
lished in  his  report  for  1873.  This  was  admittedly  incom- 
plete, but  it  was  the  beginning  of  regularly  published  statis- 
tics on  general  banking  in  lowa.^^^ 

Legislation  enacted  in  1874  to  regulate  savings  banks  con- 
tinued the  same  power  of  the  Auditor  to  call  for  statements 
from  savings  banks  which  he  had  already  possessed  over 
these  same  institutions  under  the  general  law.    Only  slight 


SUPERVISION  OF  BANKING  187 

modifications  were  made  in  the  wording  of  the  law  regard- 
ing the  content  of  the  reports.  The  Auditor  was  required  by 
law  to  communicate  to  the  General  Assembly  a  statement  of 
the  condition  of  every  savings  bank  and  also  to  make  recom- 
mendations concerning  changes  in  the  law.  Since  this  prac- 
tice had  been  started  during  the  preceding  year,  no  practical 
result  came  from  this  feature  of  the  law  except  the  separa- 
tion of  the  State  banks  from  the  savings  banks  in  the  Audi- 
tors'  summaries.^^^ 

In  the  Code  of  1897  the  same  provisions  regarding  quar- 
terly reports  were  reenacted;  and  in  addition  the  Auditor 
was  given  authority  to  call  for  special  reports  from  the 
banks  whenever  he  deemed  it  necessary.  Prior  to  1921  no 
penalty  was  imposed  for  withholding  this  statement.  An 
amendment  by  the  legislature  in  that  year  fixed  a  penalty 
of  $10  per  day  for  each  day  of  delinquency,  ten  days  being 
allowed  in  which  to  file  the  report  after  the  call  was  issued 
before  it  became  delinquent.  By  an  amendment  in  1921 
it  was  further  provided  that  the  statement  need  not  show 
the  cash  on  hand  and  amount  due  from  banks  separately.*^  ^ 

At  about  this  time  an  effort  was  made  by  the  Iowa  Bank- 
ers Association  to  secure  a  correlation  of  the  reports  of  na- 
tional and  State  chartered  banks.  A  resolution  was  adopted 
at  the  1897  convention  recommending  that  the  Auditor  make 
the  date  of  his  call  the  same  as  that  of  the  Comptroller  for 
general  statistical  and  comparative  purposes.*^^  In  his 
report  for  1903,  Auditor  B.  F.  Carroll  stated  that  the  banks 
were  recommending  that  five  reports  per  year  be  submitted 
on  the  same  date  as  the  national  bank  statements  were  called 
for.*^*  In  1911  an  amendment  to  the  Iowa  law  directed  the 
Auditor  to  call  for  reports  of  condition  five*  times  a  year 
instead  of  four  times.*^^  This  made  it  possible  for  the  Audi- 
tor to  issue  calls  simultaneously  with  the  Comptroller ;  and 
since  September,  1917,  the  State  Department  of  Banking 
has  been  sending  out  calls  at  the  same  time  as  the  Comp- 


188  HISTORY    OF    BANKING   IN   IOWA 

troller.^^*^  By  the  1911  amendment  the  names  of  the  banks 
in  which  the  bank  making  the  statement  had  deposits  subject 
to  call  were  eliminated  from  the  published  statement  of  the 
report.  Banks  were  no  longer  required  to  publish  the 
amount  of  liabilities  due  the  bank  by  the  directors  thereof. 
Provision  was  made  for  the  publication  of  the  report  by  the 
Auditor  in  some  newspaper  of  the  town  where  the  bank  is 
located,  the  expense  to  be  borne  by  the  bank. 

When  the  State  Department  of  Banking  was  created  in 
1917,  the  only  change  made  in  the  matter  of  bank  statements 
and  reports  was  to  transfer  the  duties  of  calling  for  state- 
ments and  publishing  the  same  from  the  Auditor  to  the 
Superintendent  of  Banking.  No  provision  was  made  for 
changing  certain  long  recognized  weaknesses  in  the  manner 
of  giving  these  reports  to  the  public.  During  the  past  twenty 
years  the  Auditors  have  repeatedly  called  attention  to  the 
inadequacy  of  the  present  reports.  The  bank  report  which 
has  been  published  biennially,  includes  only  one  of  the  eight 
to  ten  statements  received  during  the  two  years.  It  was 
published  as  part  of  the  Auditor's  report,  an  arrangement 
which  was  neither  convenient  nor  economical  since  many 
persons  would  be  interested  only  in  one  report  and  not  the 
other.  Auditor  B.  F.  Carroll  pointed  out  that  reports 
should  contain  a  compilation  of  all  reports  made  during  the 
year.  Auditor  J.  L.  Bleakly,  in  an  address  before  the  Iowa 
Bankers  Association  in  1910,  asked  the  support  of  the  Asso- 
ciation for  proposed  legislation  providing  for  annual  re- 
ports instead  of  the  regular  biennial  reports,  which  he  char- 
acterized as  ''ancient  history  when  it  emerges  from  the 
press."  He  stated  that  he  was  meeting  this  difficulty,  in 
part,  by  making  abstracts  of  the  call  reports  and  sending 
them  to  each  bank  in  the  State. ^^^  Since  1917  the  report 
of  the  State  Department  of  Banking  has  been  issued  sep- 
arately. 

In  the  interests  of  economy  a  considerable  forward  step 


SUPERVISION  OF  BANKING  189 

was  taken  in  the  manner  of  presenting  the  statements  of  the 
banks  in  the  reports  published  by  the  Auditor  in  1916. 
Prior  to  that  time  a  large  portion  of  the  Auditor 's  biennial 
report  was  taken  up  with  printing,  three  to  a  page,  the 
statements  of  each  bank  separately  and  for  only  one  date. 
In  1916  the  method  of  arranging  the  assets  and  liabilities 
by  columns,  following  the  model  of  the  Comptroller's  re- 
ports, was  adopted.  The  condition  of  each  bank  at  the  close 
of  the  two  fiscal  years  was  thus  presented.  In  1914  Part  11 
of  the  Auditor 's  report,  dealing  with  the  condition  of  banks, 
consisted  of  382  printed  pages.  Considerably  more  data  was 
given  in  quite  as  accessible  form  in  ninety-seven  pages  of 
the  1916  report.  In  1918  the  Superintendent  of  Banking 
returned  to  the  former  method  of  printing  each  report  sepa- 
rately. By  placing  four  to  a  page  he  was  able  to  include  aU 
of  his  report  in  348  pages,  all  but  eighteen  of  which  were 
devoted  to  individual  statements  for  one  date  only.  In  this 
matter  the  Iowa  department  is  outdone  by  some  of  those  in 
neighboring  States.  The  report  of  the  Michigan  Bank  Com- 
missioner in  1916  consisted  of  635  printed  pages,  each  bank 
having  a  page  of  its  own. 

A  comparison  of  the  statistics  compiled  and  published  by 
the  Department  of  Banking  in  Iowa  with  those  put  out  by 
the  Comptroller  of  the  Currency  and  the  banking  depart- 
ments or  bank  commissioners  of  other  States  shows  that  the 
Iowa  statistics  are  incomplete  and  inadequate.  Among  the 
features  which  are  to  be  found  in  other  reports,  and  would 
be  of  value  and  interest  are :  the  earnings  of  the  banks ;  a 
classification  of  the  kinds  of  loans ;  complete  data  as  to  all 
failures  of  banks  under  the  supervision  of  the  Banking  De- 
partment; an  abstract  of  the  reports  of  the  Comptroller 
dealing  with  the  national  banks  of  Iowa  for  comparative 
purposes ;  the  members  of  the  Federal  reserve  system ;  and 
the  data  on  all  banks  of  the  leading  cities  of  the  State  sepa- 
rately.    As  part  of  their  report,  the  Comptroller  and  cer- 


190  HISTORY    OF    BANKING    IN    IOWA 

tain  of  the  State  bank  commissioners,  or  superintendents, 
make  rather  full  reports  of  general  financial  conditions,  the 
administration  of  laws  that  have  been  enacted,  and  recom- 
mendations as  to  needed  legislation.  The  Auditor  has,  in 
the  past,  suggested  many  desirable  reforms  which  have  sub- 
sequently been  enacted  into  law.  He  has  not,  however,  been 
able  in  addition  to  his  numerous  other  duties  to  devote  much 
time  to  a  general  survey  of  financial  conditions.  In  the 
first  report  submitted  by  the  Department  of  Banking  there 
is  no  effort  to  do  anything  more  than  what  had  been  done 
before  in  this  respect.  Certain  observations  of  G.  H.  Mes- 
senger, at  that  time  Superintendent  of  Banking,  regarding 
land  values  in  Iowa,  quoted  by  the  Iowa  press  during  the 
summer  of  1919,  indicated  that  he  was  in  a  position  to  incor- 
porate in  his  report  some  facts  concerning  Iowa  economic 
conditions  that  might  well  be  published.^^^ 

EXAMINATION  OF  BANKS 

In  addition  to  the  reports  and  statements  which  the  na- 
tional and  State  supervised  banks  are  required  to  make,  they 
are  also  subject  to  periodic  examinations  by  the  supervising 
authorities.  Under  the  terms  of  the  national  banking  law 
of  1864  the  Comptroller  was  authorized  to  appoint  suitable 
persons  to  make  examinations  of  the  banks  whenever  he 
deemed  it  necessary.  It  was  the  duty  of  such  examiners  to 
make  full  and  detailed  reports  of  the  condition  of  the  insti- 
tutions to  the  Comptroller.  The  examiner  was  given  power 
to  make  a  thorough  examination  into  all  the  affairs  of  a 
bank,  including  an  examination  under  oath  of  the  officers 
and  agents  thereof.  Compensation  for  examiners  was  fixed 
at  $5  per  day,  and  $2  for  each  twenty-five  miles  they  were 
compelled  to  travel  in  the  performance  of  their  duties.  This 
fee  was  paid  by  the  bank  examined. 

In  1875  the  basis  of  compensation  was  changed  from  a 
per  diem  fee  to  a  fee  based  on  the  capital  of  the  bank  ex- 


SUPERVISION  OF  BANKING  191 

amined.  The  fee  was  graduated  according  to  the  capital, 
varying  from  $20  for  banks  having  a  capital  of  less  than 
$100,000  up  to  $75  for  those  having  a  capital  of  $600,000  or 
Qygj.  439  This  fee  system  was  open  to  the  objection  that 
since  the  examiner's  income  depended  upon  the  number  of 
banks  he  could  examine  there  was  a  temptation  to  do  hurried 
work — an  evil  which  was  recognized  by  the  Iowa  bankers 
and  condemned  by  a  resolution  of  the  Bankers  Associa- 
tion.^^^  In  the  Federal  Eeserve  Act  of  1913  several  im- 
portant changes  were  made  in  the  conduct  of  the  Comp- 
troller's examinations.  While  the  former  law  had  left  the 
number  of  examinations  to  the  discretion  of  the  Comp- 
troller, the  amendment  fixed  this  number  at  a  minimum  of 
two  in  each  calendar  year.  More  frequent  examinations 
may  be  made  if  the  Comptroller  considers  it  necessary.  The 
fee  system  was  abolished,  and  regular  salaries  have  since 
been  paid  to  the  examiners.  The  expense  of  the  examina- 
tion was  thereafter  to  be  assessed  upon  the  banks  examined 
in  proportion  to  the  assets.  This  change  from  capital  to 
assets  as  a  basis  of  assessment  is  recognized  as  a  sound 
principle,  since  the  assets  may  vary  considerably  without  a 
change  in  the  capital;  while  the  assets  are  the  items  which 
the  examiner  must  inspect. 

In  order  to  remove  any  temptations  to  partiality  in  mak- 
ing examinations,  no  examiner  is  permitted,  under  pain 
of  heavy  penalties,  to  receive  any  loan  or  gratuity  from  any 
bank  which  he  examines.  He  may  not  be  in  any  way  finan- 
cially connected  with  the  bank.  Nor  is  the  examiner  allowed 
to  disclose  his  findings  to  any  person  or  persons  except  the 
Comptroller,  the  proper  officers,  or  a  court  of  competent 
jurisdiction.^^^ 

Examinations  come  at  irregular  intervals  without  warning 
to  the  bank:  the  examiner  is  permitted  to  come  in  at  any 
time,  to  count  the  cash,  to  inspect  the  loans,  to  examine  the 
investments,  to  scrutinize  the  expense  accounts,  and  to  make 


192  HISTORY    OF    BANKING   IN   IOWA 

himself  generally  familiar  with  the  bank's  management  and 
condition.  If  he  is  not  satisfied  from  investigation  that  the 
bank  is  in  a  satisfactory  condition,  he  makes  such  report  to 
the  Comptroller  who  then  sends  notice  to  that  effect  to  the 
bank  with  suggestions  also  for  correcting  the  defect.^^- 

In  addition  to  the  examinations  by  the  regular  examiners 
under  the  Comptroller,  the  Federal  Reserve  Act  authorized 
each  Federal  reserve  bank,  with  the  approval  of  the  Federal 
reserve  agent  or  the  Federal  Reserve  Board,  to  make  spe- 
cial examinations  of  member  banks  within  its  district.^^^ 

The  Code  of  1873  contains  the  first  provisions  for  examin- 
ations of  the  banks  under  the  present  laws  of  Iowa.  At  that 
time  the  Auditor  was  authorized  to  make,  or  cause  to  be 
made,  an  examination  of  any  banking  association  operating 
under  the  general  incorporation  laws.  No  provision  was 
made  for  bearing  the  expense  of  such  examinations,  nor  was 
any  number  of  examinations  per  year  prescribed.  At  first, 
the  examinations  appear  to  have  been  conducted  very  infre- 
quently and  irregularly.  In  his  report  for  1881  the  Auditor 
noted  that  he  had  caused  to  be  made  an  examination  of  all 
incorporated  banks  of  the  State.  Apparently  only  one  ex- 
amination was  made  in  the  biennium.  His  predecessor  also 
notes  the  fact  that  he  had  complied  with  the  law  in  respect 
to  making  examinations,  but  he  does  not  state  the  number. 
At  present  it  is  the  practice  of  the  State  Department  of 
Banking  to  make  at  least  one  examination  of  all  banks  under 
its  supervision  each  year.  Banks  needing  special  attention 
are  given  more  frequent  examinations,  but  this  number  is 
not  large,  so  that  on  the  whole  annual  examinations  are  now 
the  rule. 

In  1885  Auditor  J.  W.  Cattell  called  attention  to  the  fact 
that  no  provision  was  made  for  defraying  the  expenses  of 
needed  examinations.  He  said  the  custom  had  been  to 
charge  them  to  the  bank,  and  that  the  banks  had  quite  gen- 
erally paid  them.     It  was  his  opinion  that  the  matter  should 


SUPERVISION  OF  BANKING  193 

not  be  left  in  this  doubtful  condition,  and  so  he  recommended 
a  fee  for  examination  similar  to  that  required  of  the  na- 
tional banks,  graduated  according  to  capital.  The  legisla- 
ture failed  to  act  at  that  time,  and  the  recommendation  was 
renewed  by  the  succeeding  Auditor.*^ ^ 

In  1890  the  legislature  acted  on  the  matter,  specifically 
authorizing  the  Auditor  to  appoint  one  or  more  bank  ex- 
aminers to  hold  office  at  his  pleasure.  The  expense  of  the 
examinations  was  to  be  paid  by  any  bank,  State  or  savings, 
which  received  examination.  If  the  examination  was  con- 
ducted by  the  Auditor  personally,  he  received  only  his  neces- 
sary expenses.  The  fees  for  the  regular  examiners  were 
graduated  according  to  capital,  ranging  from  $15  for  a  bank 
of  $50,000  capital  or  less  up  to  $30  for  a  bank  having  a 
capital  of  $200,000  or  over.^^^  The  provisions  of  this  legis- 
lation regarding  examinations  followed  rather  closely  the 
national  banking  law.  In  so  doing  it  introduced  the  two 
evils  of  a  fee  system  for  compensating  examiners  and  of  an 
assessment  of  expenses  according  to  capital  stock,  rather 
than  the  more  accurate  basis,  later  adopted,  of  total  assets. 

The  first  of  these  defects  was  remedied  by  legislation 
enacted  in  1904.  At  that  time  all  previous  laws  regarding 
bank  examiners  were  repealed,  and  the  Auditor  was  author- 
ized to  appoint  four  bank  examiners  at  an  annual  salary  of 
$1800  and  necessary  expenses.  The  total  amount  paid  for 
salaries  and  expenses  was  not  allowed  to  exceed  the  amount 
of  fees  collected  from  the  banks  examined.  The  amount  of 
the  fees  from  the  banks  was  not  changed,  but,  instead  of 
being  assessed  at  the  time  of  examination,  the  fees  were 
made  payable  to  the  Auditor  annually  before  March  1st  of 
each  year.^*^  In  1906  the  number  of  bank  examiners  was 
increased  to  five,  and  provision  was  made  to  include  loan 
and  trust  companies  under  the  law  relating  to  examination 
of  banks.'*^''^  Again,  in  1909  the  number  of  examiners  was 
increased  from  five  to  six.     No  change  was  made  in  the 

13 


IM  HISTORY    OF    BANKING    IN    IOWA 

salar}^  paid,  but  the  fees  payable  by  the  banks  were  raised. 
The  rates  were  fixed  at  $15  for  a  bank  having  a  capital  of 
$25,000  or  under,  and  were  graduated  up  to  $50  for  a  bank 
having  a  capital  exceeding  $150,000.  One  of  the  examiners 
was  to  be  designated  by  the  Auditor  as  chief  examiner;  it 
was  his  duty  to  have  charge  of  the  department  examiners 
and  of  reports.^^** 

Again  in  1915  the  number  of  examiners  was  increased  and 
the  assessed  fees  were  raised  while  other  modifications  were 
made  in  the  law.  The  Auditor  was  authorized  to  appoint 
from  six  to  nine  examiners.  A  qualification  for  examiners 
introduced  at  this  time  was  five  years  of  banking  experi- 
ence. The  fees  assessed  against  the  smaller  banks  re- 
mained unchanged,  but  the  maximum  amount  was  increased 
so  that  a  bank  with  a  capital  in  excess  of  $200,000  was 
charged  $150  annually.'*''^ 

The  duties  of  supervision  taken  over  by  the  Banking 
Department  in  1917  included  the  examination  of  the  banks 
and  trust  companies  of  the  State.  Power  to  appoint  from 
six  to  eight  bank  examiners  was  given  to  the  Superintend- 
ent. Three  years  of  practical  bank  experience  was  made  a 
qualification  for  the  office.  The  maximum  salary  was  raised 
to  $2200  per  annum  plus  the  necessary  expenses  incurred 
in  making  examinations.  Salaries  and  expenses  of  the 
Superintendent  and  examiners  were  again  limited  to  not 
more  than  the  fees  collected  from  the  banks  and  trust  com- 
panies.^^" 

In  1919  the  section  of  the  law  relating  to  the  number  and 
salary  of  bank  examiners  and  clerks  in  the  Banking  Depart- 
ment was  repealed  and  a  substitute  enacted  therefor.  It 
had  been  found  that  the  number  of  examiners  was  too  small 
for  the  amount  of  work  they  were  required  to  do.  More- 
over, the  salary  was  inadequate  to  hold  men  of  ability — as 
many  as  three  examiners  had  left  the  Department  in  a  single 
week  to  take  better  paying  positions  elsewhere.     To  meet 


SUPERVISION  OF  BANKING  195 

these  difficulties  the  General  Assembly  substituted  for  the 
maximum  number  of  eight  examiners,  a  limit  of  one  exam- 
iner for  each  hundred  banks  or  major  fraction  thereof  under 
the  jurisdiction  of  the  Banking  Department.  At  the  time  of 
the  passage  of  the  act  there  were  1318  State  supervised 
banks,  therefore  the  number  of  examiners  was  automatically 
increased  from  eight  to  thirteen.  The  maximum  salary  of 
examiners  was  raised  from  $2200  to  $3000. 

Increased  expenses  due  to  the  increased  number  and  pay 
of  examiners  made  necessary  a  change  in  the  fee  system 
which  had  been  in  vogue  for  several  years.  The  law  re- 
quired that  the  expenses  of  the  Department  be  met  from  the 
fees  collected  from  the  banks.  During  the  year  1918  sev- 
eral hundred  banks  had  voluntarily  contributed  ten  dollars 
each  in  order  to  sustain  the  Department.  The  basis  of  fees 
paid  by  banks  had  formerly  been  the  capital  stock  of  the 
banks.  As  a  matter  of  fact  the  inspection  of  the  assets  con- 
stituted the  real  work  of  examining  the  bank.  The  total 
assets  of  the  banks  were  growing  very  rapidly,  more  so  than 
the  capital  stock.  Hence  the  basis  of  assets,  already  used 
in  the  fee  system  of  the  national  banks,  was  adopted  in  the 
new  law.  The  rate  of  the  fees  assessed  was  $1  per  $1,000 
of  assets  on  the  first  $25,000  of  assets,  and  at  the  rate  of 
two  cents  per  $1000  of  assets  on  all  assets  over  and  above 
$25,000.  It  was  also  provided  that  no  examination  would 
be  made  for  less  than  $20.  All  fees  were  made  payable  to 
the  Superintendent  of  Banking  within  ten  days  of  the  time 
of  making  the  examination.  These  fees  were  then  to  be 
turned  over  to  the  State  Treasurer.  No  payments  toward 
salaries  or  expenses  of  the  Department  could  be  made  by 
the  Treasurer  unless  there  were  funds  on  hand,  received  as 
income  from  the  Department  to  pay  the  same.^"^^ 

The  national  or  State  bank  examiners  forward  their  re- 
ports of  the  examinations  they  make  to  the  Comptroller  or 
the  State  Banking  Department  as  the  case  may  be.    These 


196  HISTORY   OF   BANKING   IN   IOWA 

reports  are  not  communicated  to  the  bank  officials,  except 
when  it  is  necessary  to  bring  to  their  attention  some  unsatis- 
factory condition  which  demands  correction.  Bank  direc- 
tors should  possess  intelligent  knowledge  of  the  bank's 
affairs,  for  it  is  recognized  that  a  bank  whose  affairs  are 
known  to  only  one  or  two  men  is  likely  to  be  mismanaged. 
The  Comptroller  has  urged  upon  national  banks  the  desir- 
ability of  examinations  by  the  board  of  directors.  State 
Auditor  C.  C.  McCarthy  in  1893  recommended  to  the  Gen- 
eral Assembly  the  passage  of  a  law  requiring  that  directors 
of  State  supervised  banks  make  regular  examinations.  The 
legislature  enacted  a  law  the  following  year  which  provided 
that  the  board  of  directors  of  any  State  or  savings  bank 
must  appoint  an  examining  committee  from  its  own  mem- 
bers to  make  an  examination  of  the  bank  at  least  once  every 
quarter.  This  examining  committee  was  to  report  its  find- 
ings to  the  board,  which  report  must  be  recorded  in  the 
minute  book  of  the  bank.*^^  In  1906,  upon  the  recommenda- 
tion of  Auditor  B.  F.  Carroll,  this  section  was  amended  to 
require  that  one  of  the  quarterly  examinations  should  be  in 
June  and  another  in  December.  The  results  of  these  exam- 
inations, in  addition  to  their  being  recorded  in  the  minute 
book,  must  be  reported  to  the  Auditor.  Failure  to  make 
this  report  promptly  to  the  Auditor  was  to  be  followed  by 
an  examination  of  the  bank  by  one  of  the  regular  bank  ex- 
aminers at  the  expense  of  the  bank.*^^ 

Frequently  a  national  bank  and  a  savings  bank  or  trust 
company  operate  in  the  same  room  and  are  owned  by  the 
same  stockholders.  For  the  convenience  of  these  associated 
banks,  the  Banking  Department  and  the  Comptroller's  De- 
partment always  cooperate  in  making  examinations.^^* 

THE  STATE  BANKING  DEPAETMENT 

Reference  has  frequently  been  made  in  the  preceding 
pages  to  the  State  Department  of  Banking.     Prior  to  1917 


SUPERVISION  OF  BANKING  197 

the  State  chartered  banks  were  under  the  supervision  of 
the  Auditor  of  State.  It  was  early  recognized  that  the  busi- 
ness of  the  Auditor  exceeded  that  of  other  State  oflScers  and, 
therefore,  he  was  unable  to  give  the  personal  attention  to 
the  details  of  certain  branches  of  his  department  that  was 
desirable.  The  Auditors  during  the  seventies  and  early- 
eighties  all  recommended  the  creation  of  a  separate  depart- 
ment for  the  supervision  of  insurance  and  banking.^^^  Prob- 
lems connected  with  the  supervision  of  insurance  were  espe- 
cially arduous,  and  it  was  in  that  connection  particularly 
that  the  recommendation  was  pressed.  A  separate  insur- 
ance department  was  not  created  until  1913 ;  but  for  some 
time  after  this  the  banks  were  left  under  the  Auditor'-^ 
supervision.*^^ 

In  general  the  early  recommendation  of  the  Auditors 
favoring  a  separate  department  or  departments  of  banking 
and  insurance  was  supported  by  the  Grovernors.  When 
former  Auditor  Buren  R.  Sherman  became  Governor  in 
1882,  one  of  the  recommendations  in  his  first  inaugural  mes- 
sage to  the  General  Assembly  was  the  creation  of  a  Com- 
missioner of  Banks  and  Insurance.*^'^  The  Iowa  Bankers 
Association  was  also  on  record  as  favoring  a  separate  bank- 
ing department.  At  their  1912  convention  a  resolution  to 
that  effect  was  adopted  on  the  grounds  that  such  supervision 
would  be  more  efficient  and  satisfactory  to  the  banks  and 
afford  greater  protection  and  security  to  the  public  at  large. 
The  law  passed  by  the  Thirty-seventh  General  Assembly 
creating  a  separate  State  Banking  Department  was  drafted 
by  the  officers  of  the  Iowa  Bankers  Association  and  fos- 
tered by  the  Association.  It  was  doubtless  due  to  their 
support  that  the  measure  was  passed,  since  at  that  time  the 
Auditor  was  opposed  to  having  the  Banking  Department 
divorced  from  his  office.*^^ 

In  March,  1917,  the  General  Assembly  passed  an  act  estab- 
lishing the  ''Banking  Department  of  Iowa",  the  chief  officer 


198  HISTORY    OF    BANKING    IN    IOWA 

of  which  was  to  be  the  *' Superintendent  of  Banking".  All 
of  the  books,  records,  reports,  and  securities  or  papers  of 
any  kind  in  the  possession  of  the  Auditor  relating  to  bank- 
ing were  at  the  time  of  taking  effect  of  the  act  (July,  1917) 
to  be  delivered  to  the  Superintendent  of  Banking.  His 
duties  included  all  those  imposed  upon  the  Auditor  which 
related  in  any  way  to  banking  matters. 

The  Superintendent  of  Banking  was  made  an  appointive 
officer,  nominated  by  the  Governor  and  confirmed  by  a  two- 
thirds  vote  of  the  members  of  the  Senate  in  executive  ses- 
sion. But  nominations  made  to  the  Senate  may  not  be  con- 
sidered by  that  body  until  the  same  have  been  referred  to 
a  committee  of  five  appointed  by  the  president  of  the  Sen- 
ate. Nor  may  consideration  of  the  nominations  take  place 
on  the  same  legislative  day  that  the  nomination  is  referred 
to  the  committee  of  five.  The  principal  qualifications  of  the 
Superintendent,  aside  from  general  fitness,  is  that  he  shall 
have  had  at  least  five  years  executive  experience  in  a  State 
or  savings  bank  in  Iowa.  He  is  appointed  for  a  term  of 
four  years  with  a  salary  of  $4000  per  year.^'^^ 

George  H.  Messenger,  president  of  the  Van  Meter  State 
Bank  and  of  the  Linden  Bank  was  the  first  appointee.  He 
began  his  banking  experience  in  Iowa  in  1895  and  had,  dur- 
ing more  than  twenty  years  of  practical  experience,  become 
thoroughly  familiar  with  banking  in  Iowa  and  possessed  of 
a  wide  personal  acquaintance  among  bankers. ■*^'^  Mr.  Mes- 
senger resigned  early  in  1920  and  M.  V.  Henderson,  Jr.,  of 
Hawkeye,  Iowa,  was  appointed  to  succeed  him.  Mr.  Hen- 
derson was  also  a  man  of  wide  banking  experience  and  at 
the  time  of  his  appointment  was  treasurer  of  the  Iowa  Bank- 
ers Association.  At  the  expiration  of  his  term  of  office, 
July  1, 1921,  W.  J.  Murray  of  Eldora  was  appointed  for  the 
regular  term  of  four  years. 

By  the  terms  of  the  law  of  1917  the  Superintendent  of 
Banking  was  given  authority  to  appoint  not  to  exceed  four 


SUPERVISION  OF  BANKING     ^  199 

clerks  or  stenographers  in  addition  to  the  eight  bank  exam- 
iners. He  was  to  fix  the  salaries  of  clerks  and  was  held 
responsible  for  all  work  done  by  his  department.^®^  The 
1918  report  of  the  Banking  Department  shows  that  the 
office  force  consisted  of  a  secretary,  a  legal  clerk,  an  account- 
ant, and  a  stenographer.  The  duties  of  the  Department 
proved  to  be  too  heavy  to  be  properly  conducted  by  the 
office  force  permitted  by  law.  Accordingly  when  the  num- 
ber of  examiners  was  increased  in  1919,  the  law  was  also 
amended  to  permit  the  employment  of  additional  office  help. 
Clerks,  stenographers,  or  special  assistants  to  the  number 
of  one  for  each  two  hundred  banks  were  authorized.  One 
of  these  was  to  be  a  Deputy  Superintendent  of  Banking, 
who  should  be  qualified  to  perform  all  of  the  duties  of  the 
Superintendent  during  his  absence  or  inability.  The  maxi- 
mum salary  of  the  deputy  was  fixed  at  $3000  per  annum;  the 
amount  of  salaries  of  the  other  clerks  was  left  to  the  discre- 
tion of  the  Superintendent.  A  general  salary  act  was 
passed  by  the  Thirty-ninth  General  Assembly  fixing  the 
number  and  compensation  of  employees  in  the  several  State 
departments,  including  those  in  the  Department  of  Banking. 
This  act  did  not  change  the  salary  of  the  Superintendent  or 
the  Deputy  Superintendent  and  allows  for  a  salary  range 
of  from  $1800  to  $3000  per  annum  for  bank  examiners.  Ex- 
penses are  also  allowed  the  Superintendent  for  attending 
the  group  meetings,  and  the  State  convention  of  the  Iowa 
Bankers  Association,  meetings  called  by  the  Federal  Re- 
serve Bank  of  Chicago,  or  other  annual  meetings  of  banking 
supervisors  or  commissioners.  A  limit  of  $500  per  year  has 
been  fixed  for  expenses  in  attending  these  meetings.*®^ 

In  1919  the  powers  of  the  Superintendent  of  Banking 
were  enlarged ;  he  was  given  authority  to  deny  a  charter  to 
any  proposed  bank  whenever  in  his  judgment  the  locality 
in  which  the  proposed  new  bank  was  to  be  established  was 
amply  served  with  banking  facilities,  or  if  he  believed  the 


200  HISTORY    OF    BANKING    IN    IOWA 

individuals  named  as  officers  and  directors  are  not  such  as 
to  command  the  confidence  of  the  community.  An  appeal 
might  be  taken  from  his  ruling  to  the  Committee  on  Re- 
trenchment and  Reform — a  committee  of  the  legislature 
composed  of  five  members  each  of  the  Senate  and  House  of 
Representatives.  Any  order  reversing  the  decision  of  the 
Superintendent  must  have  the  majority  vote  of  this  com- 
mittee, which  decision  should  be  final  and  conclusive.  This 
increased  power  granted  the  Superintendent  was  but  tem- 
porary, the  provisions  of  the  law  in  this  respect  being  of  no 
force  or  effect  after  December  31, 1920.  Prior  to  the  meet- 
ing of  the  General  Assembly  in  1921,  an  investigation  was 
conducted  by  the  Iowa  Bankers  Association  concerning  the 
powers  of  the  banking  departments  or  boards  of  other 
States  to  refuse  bank  charters.  On  the  basis  of  the  infor- 
mation secured  it  was  planned  to  support  the  reenactment 
of  the  bill,  but  circumstances  arose  which  made  it  seem  cer- 
tain that  such  a  measure  could  not  be  passed.  Accordingly 
the  matter  was  dropped  without  presenting  any  bill  to  the 
legislature. ^^^ 

Two  principal  reasons,  growing  immediately  out  of  the 
war,  are  to  be  found  for  this  temporary  measure :  to  curtail 
unnecessary  business  expansion  during  the  period  of  recon- 
struction following  the  war ;  and  to  prevent  the  formation  of 
the  so-called  ' '  spite  banks ' '.  In  addition  to  those  who  sup- 
ported the  temporary  measure  for  these  reasons  there  were 
many  who  desired  a  law  which  would  permanently  confer 
this  power  on  the  Superintendent  in  order  thereby  to  reduce 
competition  among  banks.  In  fact,  the  opponents  of  the 
bill  charged  that  this  was  the  real  reason  for  the  passage  of 
the  law.  Evidence  is  not  lacking,  however,  showing  that 
the  temporary  causes  played  an  important  part  in  creating 
sentiment  for  the  measure.  At  the  1918  convention  of  the 
Iowa  Bankers  Association  a  resolution  had  been  passed  to 
the  effect  that  the  Association  was  opposed  to  any  new 


SUPERVISION  OF  BANKING  201 

enterprise  not  of  direct  benefit  in  winning  the  war  and 
therefore  the  Association  requested  the  Comptroller  of  the 
Currency  and  the  Superintendent  of  Banking  not  to  issue 
authority  for  any  new  bank  or  corporation  not  essential  in 
Iowa  during  the  period  of  the  war.^^^  Although  the  armis- 
tice had  been  signed  before  the  legislature  convened,  this 
reason  seems  to  have  had  some  weight.  It  was  also  charged 
that  in  some  communities  the  Germans  were  withdrawing 
and  forming  the  so-called  ' '  spite  banks ' ',  supported  by  their 
own  nationality.  These  Germans  were  said  to  be  boycotting 
the  established  banks  because  of  the  subscriptions  required 
of  them  in  the  drives  for  the  sale  of  war  bonds. 

Under  the  authority  thus  conferred  upon  him  the  Super- 
intendent of  Banking  has  had  occasion  to  defend  his  opinion 
in  at  least  two  cases.  An  appeal  was  brought  to  the  Com- 
mittee on  Retrenchment  and  Reform  by  merchants  and  busi- 
ness men  of  Unionville  who  had  been  denied  a  charter  by 
Mr.  Messenger.  The  place  is  a  small  unincorporated  town 
which  already  had  one  bank.  It  was  on  the  ground  that 
this  town  could  not  support  two  banks  that  the  proposed 
charter  was  denied.  The  decision  of  the  committee  was  a 
tie  vote,  thus  affirming  the  decision  of  the  Superintendent. 
In  the  case  appealed  from  West  Union  the  decision  of  the 
Superintendent  of  Banking  was  reversed.^^^ 

The  desirability  of  thus  allowing  one  man  to  decide  the 
question  as  to  whether  a  bank  may  be  permitted  to  obtain  a 
charter  has  been  seriously  questioned.  Since  a  similar 
authority  is  vested  in  the  Comptroller  of  the  Currency,  so 
far  as  the  establishment  of  national  banks  is  concerned, 
there  is  a  precedent  for  this  kind  of  legislation.^^^  A  ma- 
jority of  the  States  also  have  some  provision  for  preventing 
the  establishment  of  banks  where  they  do  not  appear  to  be 
needed  or  where  the  founders  do  not  command  public  con- 
fidence. The  act  which  vested  this  power  in  the  Superin- 
tendent of  Banking  also  prohibited  any  more  private  banks 


202  HISTORY    OF    BANKING    IN    IOWA 

from  commencing  business.  Of  the  wisdom  of  the  latter 
provision  there  can  be  no  question.  Neither  can  the  tem- 
porary authority  conferred  upon  the  Superintendent  be 
regarded  as  a  menace.  The  question  as  to  whether  or  not 
the  provisions  of  the  temporary  measure  should  be  per- 
manently adopted  has  aroused  considerable  difference  of 
opinion.  Iowa  already  leads  all  the  States  of  the  Union  in 
the  number  of  banks.  The  intensity  of  competition  has  re- 
sulted in  certain  evils/''^  but  it  has  also  forced  the  bankers 
to  adopt  a  policy  of  community  service  and  business  alert- 
ness which  has  been  highly  beneficial.  If  the  effect  of  such 
a  law  is  to  grant  a  monopoly  to  existing  institutions  without 
reserving  the  right  to  regulate  rates  and  service,  it  would 
be  contrary  to  public  policy.  There  is  no  reason  to  believe, 
however,  that  the  Superintendent  of  Banking  would  under- 
take to  arbitrarily  restrict  the  legitimate  extension  of  bank- 
ing facilities,  especially  since  there  is  a  chance  to  appeal  to 
the  Committee  on  Retrenchment  and  Reform. 

The  legislative  committee  of  the  Iowa  Bankers  Associa- 
tion backed  several  blue  sky  bills  which  were  intended  to 
provide  regulations  for  the  promotion  fees  for  the  issuance 
or  sale  of  stock  by  corporations.  In  general  this  program 
failed  of  passage,  but  one  bill,  prohibiting  the  receiving  of 
a  commission  or  bonus  of  any  kind  for  organizing  a  bank 
or  securing  subscriptions  of  capital  to  the  same,  was  enacted 
into  law.^®*  This  would  appear  to  be  a  further  step  in  the 
direction  of  discouraging  the  establishment  of  new  banks 
except  where  really  needed. 

In  the  supervision  of  banking  Iowa  ranks  fairly  well 
among  the  States.  Supervision  of  private  banks  continues 
to  be  lax  and  wholly  inadequate,  but  the  prohibition  by  law 
of  new  private  banks  and  the  steady  rate  at  which  this  type 
of  institution  has  been  organizing  under  State  or  national 
laws  makes  it  seem  probable  that  the  number  of  these  banks 


SUPERVISION  OF  BANKING  203 

in  the  future  will  be  relatively  insignificant.  Perhaps  in 
time  public  sentiment  will  support  a  law  which  will  either 
force  the  remaining  institutions  under  State  supervision  or 
else  take  from  them  the  right  to  call  themselves  banks. 
With  the  organization  of  the  Department  of  Banking  a  for- 
ward step  was  taken  which  placed  Iowa  in  line  with  the 
other  leading  States.  As  time  passes  this  Department  may 
be  expected  to  be  of  still  greater  service  to  the  banks  and 
the  public.  The  efficiency  of  supervision  in  the  past,  as 
well  as  the  conservative  character  of  Iowa 's  bankers,  is  at- 
tested by  the  small  list  of  failures  among  the  State  super- 
vised banks. 


THE  FEDERAL  RESERVE  SYSTEM  IN  IOWA 

The  establishment  by  Congress  of  the  Federal  reserve 
system  in  1913  changed  materially  the  position  of  the  na- 
tional banks  of  Iowa.  Moreover,  its  influence  on  the  State 
chartered  banks  has  been  very  marked.  Considerable  spe- 
cial legislation  has  been  necessary  to  adapt  the  Iowa  bank- 
ing laws  to  the  changed  conditions,  and  in  the  future  the 
influence  of  the  Federal  reserve  system  in  Iowa  banking 
may  be  expected  to  become  even  more  important.  Because 
of  its  importance  and  because  of  its  special  nature,  the  his- 
tory of  the  system  in  Iowa  has  been  reserved  for  special 
treatment  in  this  chapter. 

ORIGIN  OF  THE  FEDERAL  RESERVE  SYSTEM 

The  temporary  breakdown  of  the  nation's  banking  sys- 
tem in  the  panic  of  1907  was  the  immediate  cause  of  the 
adoption  of  the  Federal  Reserve  Act.  Defects  in  the  bank- 
ing system  of  the  country  had  been  pointed  out  from  time 
to  time,  but  the  nation  was  not  thoroughly  awakened  to  the 
need  of  a  fundamental  change  in  its  banking  organization 
until  the  crisis  of  1907  revealed  the  weaknesses  of  the  old 
system.  The  underlying  defect  was  shown  to  be  a  lack  of 
cohesion  in  the  entire  banking  structure.  Nearly  twenty- 
five  thousand  banks  were  operating  in  the  United  States 
in  1907;  and  approximately  seven  thousand  of  these  were 
under  national  law.  The  remainder  were  either  under 
State  laws  or  were  entirely  unregulated.^^^  Even  in  the 
case  of  the  national  banks  there  was  lacking  the  necessary 
centralization  of  control  and  unity  of  action.  Whatever 
united  effort  was  put  forth  to  save  the  banks  in  the  crisis 

204 


FEDERAL  RESERVE  SYSTEM  IN  IOWA  205 

came  through  the  clearing  house  associations  of  the  various 
cities. 

Congress  was  not  prepared  to  adopt  a  comprehensive  re- 
form in  banking  during  the  session  of  1907-1908.  The  need 
for  more  information  was  recognized  and  met  by  the  crea- 
tion of  a  National  Monetary  Commission,  composed  of  nine 
members  from  each  branch  of  Congress.  This  commission 
was  given  liberal  appropriations  and  authorized  to  make 
a  thorough  study  of  monetary  conditions  in  this  country  and 
abroad.  Meanwhile,  some  steps  had  to  be  taken  to  meet  the 
strong  popular  demand  for  currency  reform.  A  bill  was 
hurriedly  passed  and  approved.  May  30, 1908,  known  as  the 
Aldrich-Vreeland  Act.  This  act  was  recognized  as  a  tem- 
porary expedient,  since  it  was  to  expire  by  limitation  on 
June  30,  1914.  It  was  later  extended  one  year  by  the  Fed- 
eral Reserve  Act.  Under  the  provisions  of  this  act  asso- 
ciations of  banks,  known  as  '^  National  Currency  Associa- 
tions", were  permitted  to  issue  currency  secured  by  a  de- 
posit of  commercial  paper.  There  was  also  provision  for 
the  issue  of  additional  circulation  secured  by  deposit  of 
bonds  other  than  bonds  of  the  United  States  by  national 
banks  not  members  of  a  currency  association.  The  purpose 
of  the  additional  circulation  provided  by  the  act  was  solely 
to  furnish  an  emergency  currency.*"^*^ 

After  a  thorough  study  of  banking  and  currency  problems 
in  the  United  States  and  the  other  leading  commercial  coun- 
tries, the  National  Monetary  Commission  brought  in  a  re- 
port and  a  bill  in  1911 ;  but  no  action  was  taken  until  after 
President  Wilson's  inauguration  in  1913.  Together  with 
tariff  revision,  banking  and  currency  reform  became  one  of 
the  important  problems  before  the  special  session  of  Con- 
gress. The  monetary  legislation  was  put  through  as  a 
party  measure,  and  the  majority  of  the  Iowa  members  of 
Congress,  being  Republicans,  opposed  its  enactment.  While 
the  bill  was  before  Congress  the  sentiment  of  Iowa  bankers 


206  HISTORY    OF    BANKING    IN    IOWA 

was  unfavorable  to  the  measure.  Speaking  in  opposition 
to  the  compulsory  feature  of  the  measure,  so  far  as  national 
banks  were  concerned,  Representative  H.  M.  Towner  stated 
that  he  had  sent  copies  of  the  bill  to  bankers  in  his  district, 
asking  an  expression  of  opinion.  Of  the  thirty-eight 
answers  received,  only  two  favored  the  bill ;  three  Avere  non- 
committal; and  the  rest  opposed  it.  Eighteen  national 
bankers  stated  that  they  would  give  up  their  charters  rather 
than  accept  the  conditions  of  the  bill."*^^  Amendments  sub- 
sequently adopted  met  some  of  the  objections  raised  by  the 
bankers ;  but,  on  the  whole,  the  sentiment  of  Iowa  bankers 
was  one  either  of  opposition  or  of  indifference  to  the  act 
when  finally  passed.  Some  prominent  Iowa  bankers,  on 
the  other  hand,  strongly  endorsed  the  new  system.  Among 
these,  Arthur  Reynolds  of  Des  Moines,  President  of  the 
American  Bankers  Association,  was  an  active  leader.*'^ 

When  the  time  came  to  organize  the  system  and  divide 
the  country  into  districts,  Iowa  bankers  were  interested  in 
preventing  the  State  from  being  split  into  several  parts. 
The  Council  of  Administration  of  the  Iowa  Bankers  Asso- 
ciation voted  on  January  9, 1914,  to  take  up  with  the  organ- 
ization committee  the  question  of  having  the  entire  State 
placed  in  the  Chicago  district.  A  large  committee  of  Iowa 
bankers  met  with  the  committee  on  January  19th. ^"^^  The 
division  of  the  country  into  districts,  which  resulted  in  plac- 
ing the  entire  State  of  Iowa  in  the  seventh  district,  with 
headquarters  at  Chicago,  was  an  arrangement  very  satis- 
factory to  the  Iowa  banks. 

Provision  was  made  for  the  establishment  of  branches  of 
the  Federal  reserve  banks  to  serve  localities  inconveniently 
located  with  regard  to  the  bank  of  their  district.  Twenty- 
one  branches  of  the  twelve  Federal  reserve  banks  had  been 
established  by  March  1,  1920.*'^*  The  fact  that  no  such 
branches  have  been  established  to  serve  Iowa  banks  is  evi- 
dence that  Chicago  has  proved  suflficiently  convenient. 


FEDERAL  RESERVE  SYSTEM  IN  IOWA  207 

MEMBERSHIP  IN  THE  SYSTEM 

Membership  in  the  Federal  reserve  system  was  made  com- 
pulsory for  all  national  banks  and  optional  for  the  State 
chartered  banks.  Sixty  days  were  allowed  the  national 
banks  in  which  to  signify  their  intention  of  joining;  State 
banks  were  allowed  the  privilege  of  entering  at  any  time. 
In  spite  of  the  earlier  threats  of  withdrawal  from  the  na- 
tional system,  all  but  seventeen  of  the  national  banks  of  the 
entire  country  had  signified  their  acceptance  of  the  system 
by  the  end  of  the  sixty  day  limit.^'^^  State  banks,  on  the 
other  hand,  were  almost  as  unanimous  in  staying  out 
of  the  system.  Up  to  June  21,  1917,  when  some  important 
amendments  to  the  law  were  passed,  only  fifty-three  State 
banks  and  trust  companies  in  the  United  States  had  become 
members.*^® 

The  provisions  of  the  Federal  Reserve  Act  regarding 
State  bank  membership  required  the  banks  to  conform  to  the 
capital  requirements  of  national  banks,  to  observe  the  limi- 
tation on  loans  to  a  single  individual  or  firm  of  ten  per  cent 
of  the  capital  and  surplus  of  the  bank,  to  meet  the  same 
reserve  requirements  as  national  banks,  and  to  be  subject 
to  examination  and  supervision  of  the  Federal  Reserve 
Board.^^'^  In  the  amendments  which  have  since  been  en- 
acted, particularly  those  of  June  21,  1917,  changes  have 
been  made  in  certain  general  features  of  the  act  and  in  the 
sections  relating  especially  to  State  bank  membership  which 
make  the  system  more  attractive  to  State  banks. 

The  important  changes  made  in  the  system  in  June,  1917, 
were,  first,  the  lowering  of  the  reserve  requirements  for  all 
member  banks,  the  cash-in-bank  reserve  being  left  entirely 
at  the  option  of  the  banker.  The  amount  to  be  held  on  de- 
posit in  the  Federal  Reserve  Bank  was  fixed  at  thirteen  per 
cent  of  the  demand  deposits  and  three  per  cent  of  the  time 
deposits  for  banks  in  a  central  reserve  city.  Banks  situated 
in  reserve  cities  must  have  on  reserve,  with  the  Federal 


208  HISTORY   OF   BANKING   IN   IOWA 

Reserve  Bank,  ten  per  cent  of  the  demand  deposits  and 
three  per  cent  of  the  time  deposits.  At  present  banks  in 
four  Iowa  cities  come  under  this  provision.^ '^  Banks  in  all 
other  cities  or  towns  of  the  State  were  required  to  keep 
reserves  of  seven  per  cent  of  their  demand  deposits  and 
three  per  cent  of  their  time  deposits. 

In  the  second  place,  the  State  bank  members  were  given 
certain  new  special  privileges.  They  were  given  the  oppor- 
tunity of  withdrawing  from  membership  at  any  time  upon 
six  months  written  notice  to  the  Federal  Reserve  Board. 
State  banks  were  permitted  to  become  members  of  the  sys- 
tem and  still  loan  to  one  individual  or  firm  an  amount  above 
the  ten  per  cent  of  capital  and  surplus  which  was  the  maxi- 
mum for  national  bank  members.  But  in  case  any  borrower 
owed  a  member  State  bank  in  excess  of  the  ten  per  cent,  his 
paper  was  made  ineligible  for  rediscount.  Provision  was 
also  made  whereby  the  examinations  made  by  State  author- 
ities might  be  accepted  in  lieu  of  examinations  made  by  the 
examiners  approved  by  the  Federal  Reserve  Board.  The 
number  of  reports  of  condition  and  of  payment  of  dividends 
required  from  State  bank  members  was  fixed  at  not  less 
than  three  each  year.^^® 

State  banks  in  Iowa  were  barred  from  the  opportunity 
of  becoming  members  of  the  system  during  the  first  year  of 
operation.  Auditor  John  L.  Bleakly  stated  that  he  had 
many  inquiries  at  the  outset  from  State  banks  desiring 
membership,  but  his  ruling  was  that  the  permission  could 
not  be  granted  until  the  legislature  changed  the  Iowa  laws 
to  permit  banks  to  hold  stock  in  other  banks.^^^  At  the  1915 
session  of  the  legislature,  State  banks,  savings  banks,  and 
trust  companies  were  granted  the  right  to  subscribe  for 
stock  of  the  Federal  Reserve  Bank,  upon  an  affirmative  vote 
of  fifty-one  per  cent  of  their  stockholders.**^  Although  the 
way  was  thus  cleared  as  soon  as  possible  for  State  banks  to 
join  the  system,  only  one  State  chartered  bank  in  Iowa,  the 


FEDERAL  RESERVE  SYSTEM  IN  IOWA  209 

Bankers  Loan  and  Trust  Company  of  Sioux  City,  was  a 
member  of  the  Federal  reserve  system  by  the  end  of  the 
year  1916.^^'' 

ATTITUDE  OF  IOWA  BANKERS 

The  explanation  of  the  failure  of  State  banks  to  join  the 
system  lies  partly  in  defects  of  the  law  during  the  early 
years  and  partly  in  the  attitude  of  hostility  or  opposition 
shown  to  the  system  by  national  bank  members.  The  posi- 
tion of  the  Iowa  Bankers  Association  can  be  shown  from 
the  attitude  of  the  1915  and  1916  conventions.  At  the  1915 
convention  Senator  John  Weeks  of  Massachusetts,  a  mem- 
ber of  the  banking  and  currency  committee  of  the  Senate 
during  the  session  which  passed  the  Federal  reserve  law, 
addressed  the  bankers  on  the  general  relations  of  the  gov- 
ernment to  business.  Senator  Weeks  had  been  one  of  the 
few  Republican  Senators  to  vote  for  the  bill;  and  in  the 
course  of  his  address  he  endorsed  the  Federal  reserve  sys- 
tem in  rather  luke-warm  manner.^^^ 

A  year  later  the  spirit  of  the  convention  was  one  of  open 
opposition  to  certain  phases  of  the  system.  The  President 
of  the  Association  in  his  annual  address  stated  that  in  his 
opinion  the  war  alone  had  prevented  a  disastrous  panic  at 
the  opening  of  operation  of  the  banks.  He  advised  banks 
not  members  to  ''think  long  and  earnestly",  if  they  were 
considering  joining,  before  deciding  affirmatively.  He  even 
went  so  far  as  to  say:  "I  believe  I  am  not  suggesting  any- 
thing out  of  the  way  in  saying  that  the  State  and  savings 
banks  of  this  State,  should  they  ever  desire  or  feel  that  they 
should  belong  to  the  Federal  Reserve  Bank,  would  find  it  a 
great  mistake  and  calamity  to  them."*^** 

F.  Howard  Hooke,  editor  of  the  Financial  Age  of  New 
York  City,  addressed  the  same  session  of  the  Association. 
He  asserted  that  the  Federal  Reserve  Act  as  it  stood  on 
the  statute  books  "is  fundamentally  unsound,  structurally 

14 


210  HISTORY   OF   BANKING   IN   IOWA 

wrong  and  impracticable  in  its  operation."  One  of  his 
arguments,  which  might  be  expected  to  be  particularly  effec- 
tive in  discouraging  State  bank  membership,  was  the  cost 
of  the  system  to  the  member  banks.  "It  cost  the  bankers 
and  indirectly  the  people  $1,700,000  to  operate  the  Federal 
Eeserve  Banks  last  year,  and  with  increasing  activities  the 
Lord  only  knows  what  it  will  cost  in  subsequent  years '  *,  was 
one  of  Mr.  Hooke's  statements.^^^ 

In  view  of  the  subsequent  record  under  increasing  activ- 
ities these  objections  furnish  interesting  reading.  In  1918 
the  gross  earnings  of  the  entire  system  were  $67,584,417, 
and  net  earnings  were  $55,446,979.  The  net  earnings  of 
the  Federal  Eeserve  Bank  of  Chicago  were  $6,805,081 — 
equivalent  to  about  sixty-one  per  cent  of  the  paid-up  capital 
as  of  December  31,  1918.  After  paying  dividends  of 
$603,602  there  remained  $3,100,223  to  transfer  to  the  surplus 
fund  and  an  equal  amount  to  turn  over  to  the  government 
as  a  franchise  tax,  in  accordance  with  the  plan  for  division 
of  earnings  above  the  six  per  cent  cumulative  dividend 
allowed  the  member  banks.  In  1919  the  net  earnings  of  the 
Federal  Reserve  Bank  of  Chicago  were  $8,576,204.  The  net 
earnings  for  the  entire  system  in  1920  were  158.4  per  cent 
of  the  capital  stock.^^^ 

Some  support  for  the  Federal  reserve  system  was  brought 
out  in  the  discussion  of  a  resolution  to  the  effect  that  the 
Iowa  Bankers  Association  favored  the  abolition  of  the 
Comptroller's  office.  The  resolution  was  finally  tabled.**'^ 
On  the  whole,  however,  the  attitude  toward  the  new  system 
during  the  first  two  years  of.  its  existence,  as  shown  by  the 
Iowa  Bankers  Association,  was  either  one  of  indifference 
or  opposition. 

The  outbreak  of  the  war  and  the  amendments  of  June, 
1917,  were  responsible  for  a  marked  change  in  the  member- 
ship of  State  institutions.  The  removal  of  obstacles  in  the 
way  of  State  bank  membership  came  at  a  time  when  the 


FEDERAL  RESERVE  SYSTEM  IN  IOWA  211 

requirements  of  financing  the  war  made  evident  the  need 
for  cooperation.  Patriotism  was  coupled  with  a  desire  on 
the  part  of  banks  to  strengthen  their  own  position  for  the 
great  effort  of  war  financing.  President  Wilson  urged  upon 
the  banks  the  need  for  strengthening  the  resources  of  the 
Federal  reserve  system.  He  stated  that  the  financial  power 
of  the  country  would  depend  largely  ^  ^  upon  the  strength  and 
staying  powers  of  the  Federal  reserve  banks".  Eligible 
State  banks  were  urged  to  consider  the  question  of  member- 
ship in  the  Federal  reserve  system  as  a  ''solemn  obliga- 
tion ".''^^ 

Iowa 's  response  to  this  appeal  is  noteworthy.  By  the  end 
of  1918  seventy-seven  State  banks  were  members.  Among 
these  were  included  some  of  the  larger  State  banks,  notably 
the  American  Commercial  Savings  Bank  of  Davenport  with 
resources  of  fourteen  and  one-half  million  dollars.^*® 

By  1918  there  was  a  complete  reversal  of  attitude  by  the 
Iowa  Bankers  Association.  The  members  of  the  Associa- 
tion gathered  in  convention  at  Dubuque  on  June  19th  and 
20th  when  the  war  situation  was  not  encouraging.  The 
thought  of  the  hour  was  centered  upon  winning  the  war,  and 
as  bankers  the  members  of  the  Association  sought  to  carry 
their  share  of  the  burden.  Praise  for  the  part  played  by 
the  Federal  reserve  banks  in  handling  the  financial  prob- 
lems of  the  war  was  frank  and  generous.  C.  A.  Hinsch, 
President  of  the  American  Bankers  Association,  stated  in 
the  course  of  his  address,  that:  **The  Federal  Reserve  Act  is 
the  greatest  piece  of  constructive  legislation  ever  enacted 
by  our  Government  and  it  is  very  fortunate  indeed  that  we 
were  able  to  place  this  great  system  in  operation  before  en- 
tering the  world  war.  .  .  .  All  eligible  State  Banks 
should  join  the  system.  It  is  inconceivable  that  the  Na- 
tional Banks  alone  would  be  expected  or  permitted  to  insure 
the  financial  stability  of  the  country  unaided  by  the  eligible 
State  Banks."    J.  B.  McDougal,  Governor  of  the  Federal 


212  HISTORY   OF   BANKING   IN   IOWA 

Eeserve  Bank  of  Chicago,  also  strongly  urged  State  banks 
to  join.  He  expressed  the  opinion  that  the  attitude  of  in- 
difference and  criticism  at  first  shown  by  members  had 
changed.  President-elect  J.  H.  Ingwersen  endorsed  every 
statement  made  by  Governor  McDougal  and  urged  the  need 
of  a  unified  system  of  banking. 

Official  endorsement  of  the  Federal  reserve  system  was 
given  by  the  Iowa  Bankers  Association  in  a  resolution  which 
reads  as  follows : 

Whereas,  the  Federal  Reserve  System  has  proven  a  tower  of 
strength  to  the  Nation,  and  to  our  aUies  in  financing  the  activities 
of  war  and  in  stabilizing  and  protecting  the  business  interests  of 
the  country: 

Therefore,  Be  It  Resolved,  That  we,  the  Iowa  Bankers,  in  Con- 
vention assembled,  endorse  the  Federal  Reserve  System  and  recom- 
mend that  State  Banks  give  careful  and  favorable  consideration  to 
the  privilege  they  have  of  becoming  members  of  the  system,  both 
for  the  advantages  they  wiQ  gain  and  as  a  patriotic  duty  to  aid 
the  Government  to  mobilize  the  financial  resources  of  the  Nation 
for  the  successful  prosecution  of  the  War.*^*' 

The  good  will  of  the  Iowa  Bankers  Association  toward  the 
Federal  reserve  banks  has  been  repeatedly  manifested  in 
succeeding  years.  Governor  W.  P.  G.  Harding  of  the  Fed- 
eral Reserve  Board  has  twice  been  welcomed  as  a  conven- 
tion speaker  and  the  officers  of  the  Federal  Reserve  Bank 
of  Chicago  have  also  addressed  the  Iowa  bankers  at  the  an- 
nual convention.  In  November,  1920,  the  Association  pro- 
moted a  series  of  farmer-banker  conferences  at  which  the 
officials  of  the  Reserve  Bank  were  the  principal  speakers. 
At  the  annual  convention  earlier  in  the  same  year  a  per- 
manent Federal  Reserve  Committee  was  created  whose  duty 
is  to  present  to  the  officers  of  the  Federal  Reserve  Bank 
matters  affecting  the  members  of  the  Association  and  to  co- 
operate with  them  in  securing  needed  changes  in  the  law 
or  its  administration.^^^ 


FEDERAL  RESERVE  SYSTEM  IN  IOWA  213 

SEEVICE  IN  THE  CEISI8  OF  1920 

The  signing  of  the  armistice  did  not  terminate  immedi- 
ately the  necessity  for  government  financing.  Moreover,  it 
left  a  heavy  problem  of  credit  readjustment.  During  the 
early  months  of  the  year  1919  business  was  somewhat  un- 
certain and  wholesale  prices  slumped  slightly.  This  was 
followed  by  a  post  war  boom  in  practically  all  lines  of  indus- 
try. In  Iowa  this  activity  in  general  business  was  accom- 
panied by  land  speculation  and  the  flotation  of  many  indus- 
trial propositions,  few  of  which  gave  promise  to  a  conserva- 
tive investor  of  being  ultimately  successful.  The  average 
price  of  land  increased  $63  per  acre  during  1919 ;  cases  of 
re-sale  within  a  few  weeks  at  an  advance  of  from  $50  to 
$100  per  acre  were  not  uncommon  during  the  summer 
months.  During  the  same  period  $200,000,000  of  capital 
are  estimated  to  have  been  wasted  in  wildcat  promotion 
projects. 

During  1919  the  Federal  Reserve  Board  hesitated  to  try 
to  curb  this  over-extension  of  credit  by  raising  the  discount 
rates  of  the  banks.  According  to  the  Governor  of  the  Fed- 
eral Reserve  Board,  the  ''principal  reason  why  discount 
rates  were  not  increased  earlier  than  they  were  in  1919  was 
on  account  of  Treasury  financing."  Purchasers  of  Liberty 
bonds  had  been  urged  to  ''borrow  and  buy"  on  the  promise 
of  low  interest  rate  on  notes  secured  by  government  obliga- 
tions. By  the  end  of  the  year  1919  it  was  felt  that  the  bond 
purchasers  had  been  given  sufficient  assistance.  In  the 
early  weeks  of  1920,  therefore,  the  Federal  reserve  discount 
rates  were  increased  in  the  hope  of  checking  further  infla- 
tion. Rates  on  commercial  paper  were  advanced  from  four 
and  three-fourths  per  cent  to  six  per  cent  for  the  Chicago 
district.  In  the  early  summer  the  commercial  rate  was  ad- 
vanced to  seven  per  cent.  The  effect  of  this  was  to  aid  in 
checking  the  expansion  of  credit  and  starting  a  movement 
toward  liquidation. 


214  HISTORY   OF    BANKING   IN   IOWA 

The  reports  of  the  State  and  savings  banks  in  Iowa  show 
that  expansion  of  credit  continued  until  the  spring  of  1920. 
On  April  2nd,  the  State  and  savings  banks  reached  the  maxi- 
mum volume  of  loans  shown  by  any  report  to  date,  the  total 
being  $647,850,601.  Compared  with  the  nearest  correspond- 
ing date  in  1919  this  was  an  increase  of  $168,705,165,  repre- 
senting an  expansion  of  loans  of  over  thirty-five  per  cent 
during  the  year.  From  April  to  November,  1920,  there  was 
a  decline  of  $7,814,576  in  loans.  In  the  meantime  deposits 
had  fallen  from  $705,487,819  to  $620,861,010,  a  drop  of 
$83,626,809,  or  over  ten  times  the  reduction  which  had  taken 
place  in  loans.  Since  that  time  liqiudation  has  continued, 
loans  on  March  22,  1921,  being  $616,993,214,  or  $30,857,386, 
below  the  corresponding  date  in  1920  at  which  time  they 
had  stood  at  the  maximum.  Deposits  still  continued  to  de- 
cline more  rapidly  than  loans,  but  after  November  the 
liquidation  of  the  two  proceeded  at  a  more  nearly  equal  rate. 
On  March  22nd  the  deposits  were  $586,079,164,  this  being 
$119,408,654  below  the  high  mark  of  one  year  earlier. 

To  meet  such  an  unusual  demand  by  depositors  the  banks 
were  compelled  to  increase  materially  their  bills  payable 
and  rediscounts.  On  April  2,  1920,  this  item  in  the  con- 
solidated statement  was  $36,776,367,  w^hich  was  slightly 
more  than  double  what  it  had  been  a  year  earlier.  This 
figure  mounted  rapidly  during  1920,  reaching  a  maximum 
of  $80,143,951  on  December  31st.  The  March,  1921,  state- 
ment shows  that  the  banks  had  somewhat  improved  their 
position  in  this  respect.  The  average  percentage  of  reserve 
in  all  State  and  savings  banks  was  16.7  per  cent  on  April  2, 
1920,  12.5  per  cent  on  November  3rd,  and  13.4  per  cent  on 
March  22,  1921.  Taken  as  a  whole,  therefore,  the  reserve 
position  of  the  banks  was  fairly  well  sustained,  a  thing 
which  would  seemingly  have  been  quite  impossible  without 
liberal  resort  to  rediscounting  operations. 

The  data  given  are  for  State  and  savings  banks,  of  which 


FEDERAL  RESERVE  SYSTEM  IN  IOWA  215 

only  80  out  of  over  1300  were  members  of  the  Federal  re- 
serve system.  Data  for  the  national  banks  covering  the 
same  period  are  not  available  to  the  writer,  but  data  con- 
cerning total  rediscounts  with  the  Federal  reserve  bank 
indicate  that  somewhat  similar  results  would  be  shown  by 
including  them.  Since  all  of  the  national  banks  are  mem- 
bers of  the  Federal  reserve  system,  it  was  to  them  that  the 
rediscount  privilege  proved  of  most  direct  benefit.  But 
the  rediscounts  secured  by  Iowa  banks  from  their  corre- 
spondents in  Chicago,  New  York,  and  other  financial  cen- 
ters, were  practically  all  made  with  members  of  the  Federal 
reserve  system.  They  made  these  advances  much  more 
freely  because  they  were  able  to  look  to  the  Federal  reserve 
bank  in  their  district  for  assistance.  Indirectly,  therefore, 
the  non-member  banks  were  securing  help  from  the  Federal 
reserve  system. 

The  direct  service  of  the  Federal  Reserve  Bank  of  Chi- 
cago in  rediscounting  paper  for  Iowa  banks  is  shown  by 
data  of  the  rediscounts  on  representative  dates.  During 
the  months  following  the  war  when  war  borrowing  was  still 
the  dominant  reason  for  advances  by  the  Federal  reserve 
banks,  the  loans  to  Iowa  member  banks  by  the  Federal  Re- 
serve Bank  of  Chicago  reached  a  high  point  in  May,  1919, 
of  only  $32,000,000.  A  year  later  the  figure  was  $65,000,000. 
During  the  summer  of  1920  the  amount  was  reduced  some- 
what ;  but  in  the  fall  it  mounted  steadily,  reaching  $91,000,- 
000  in  November,  1920,  and  $97,000,000  in  January,  1921. 
On  April  8, 1921,  it  was  reported  that  of  the  457  Iowa  mem- 
bers of  the  Federal  reserve  system  375  banks  were  borrow- 
ing. The  records  on  that  date  showed  outstanding  loans 
by  the  Federal  Reserve  Bank  with  Iowa  banks  of  $75,000,- 
000.  The  basic  line  for  the  Iowa  banks  was  then  $36,000,- 
000;  the  excess  was,  therefore,  more  than  one  hundred  per 
cent.  Three  hundred  and  twelve  of  the  borrowing  banks 
were  reported  to  be  over  their  basic  loaning  line,  some  of 


216  HISTORY    OF   BANKING   IN   IOWA 

them  as  much  as  fifteen  times.  By  an  amendment  of  the 
Federal  Reserve  Act  of  April  13,  1920,  the  Federal  reserve 
banks  were  authorized  with  the  approval  of  the  Board  to 
establish  graduated  rates  of  discount.  These  progressive 
rates  could  be  assessed  only  against  amounts  discounted  in 
excess  of  the  basic  line.  Four  of  the  Federal  reserve  banks 
applied  the^e  super-rates,  but  the  Chicago  bank  maintained 
uniform  rates  on  all  rediscounts. 

In  spite  of  these  large  rediscounts  by  Iowa  banks,  the 
idea  has  persisted  that  the  reserve  system  has  not  served 
the  needs  of  the  farmer.  In  order  to  promote  a  better 
mutual  understanding  between  the  farmers,  the  Iowa  bank- 
ers, and  the  officials  of  the  Federal  Reserve  Bank  of  Chicago, 
four  farmer-banker  conferences  were  arranged  by  the  Fed- 
eral Reserve  Committee  of  the  Iowa  Bankers  Association. 
These  conferences  were  held  in  different  sections  of  the 
State  during  November,  1920.  Executive  officers  of  the 
Federal  Reserve  Bank  of  Chicago  attended  each  of  these 
conferences.  In  the  estimation  of  the  committee,  they 
*  *  served  immeasurably  in  bridging  a  difficult  situation ;  be- 
cause they  not  only  corrected  the  viewpoint  of  the  farmer, 
but  also  the  officials  of  the  Federal  Reserve  Bank  on  just 
the  circumstances  under  which  the  Iowa  banker  was  work- 
ing." 

In  the  spring  of  1921  the  officials  of  the  Federal  Reserve 
Bank  appeared  anxious  to  press  liquidation  somewhat  more 
rapidly.  But  at  that  time  further  liquidation  appeared  to 
the  Iowa  bankers  to  be  quite  impracticable.  A  conference 
was,  therefore,  held  on  April  8th  in  Chicago  by  L.  A.  An- 
drew, President  of  the  Iowa  Bankers  Association,  and  M. 
V.  Henderson,  Jr.,  State  Superintendent  of  Banking,  with 
the  executive  officers  of  the  Federal  Reserve  Bank.  The 
result  of  the  conference  was  an  understanding  that  con- 
servatively managed  Iowa  banks  would  be  granted  the 
credit  absolutely  needed.     Unsound  practices  were  to  be 


FEDERAL  RESERVE  SYSTEM  IN  IOWA  217 

severely  censured.  Mr.  Andrew  expressed  himself  in  his 
report  on  the  conference  as  surprised  at  the  extent  to  which 
the  Federal  Reserve  Board  had  gone  to  take  care  of  the 
Iowa  situation.^^2 

ADVANTAGES  AND  DISADVANTAGES  OF  STATE  BANK 
MEMBERSHIP 

One  of  the  advantages  that  membership  in  the  Federal 
reserve  system  brings  to  the  State  banks  of  Iowa  is  lower 
reserve  requirements.  Under  the  Iowa  law  State  and  sav- 
ings banks  located  in  towns  of  less  than  3000  population 
must  keep  a  cash  reserve  of  fifteen  per  cent  of  their  sight 
and  demand  deposits  and  eight  per  cent  of  the  savings  de- 
posits and  certificates  of  indebtedness.  For  towns  above 
3000  population  the  proportions  are  twenty  and  eight  per 
cent  respectively.  Of  this  reserve,  eighty-five  per  cent  may 
be  kept  in  other  banks  under  State  or  national  law. 

By  an  amendment  to  the  State  law  in  1919  State  bank 
members  of  the  Federal  reserve  system  were  permitted  to 
conform  their  reserve  requirements  to  those  of  the  national 
bank  members.*^^  The  reserve  requirement  for  the  Fed- 
eral reserve  system  is  seven  per  cent  of  the  demand  and 
three  per  cent  of  the  time  deposits  for  all  the  banks  of  Iowa 
with  the  exception  of  those  banks  located  in  the  reserve 
cities  of  Cedar  Rapids,  Des  Moines,  Dubuque,  and  Sioux 
City,  in  which  the  percentages  are  ten  per  cent  on  the  de- 
mand deposits  and  three  per  cent  for  time  deposits.  All 
of  this  prescribed  reserve  must  be  kept  in  the  Federal  Re- 
serve Bank  at  Chicago.  Moreover,  this  reserve  balance 
need  not  be  inactive,  but  may  be  drawn  against  in  precisely 
the  same  manner  as  a  balance  with  any  correspondent.  The 
average  daily  balance  over  a  weekly  or  semi-monthly  period, 
however,  must  equal  an  amount  representing  the  percent- 
ages applicable  to  the  bank  in  question.  The  cash-in-bank 
reserve  of  the  member  banks  is  left  optional  with  them. 


218  HISTORY   OF   BANKING   IN   IOWA 

If  the  percentage  of  cash  which  the  Iowa  law  requires  a 
bank  to  keep  on  hand  represents  an  adequate  supply,  mem- 
bership in  the  Federal  reserve  system  would  reduce  by  one- 
half  the  legal  reserves  of  Iowa  banks.  The  concentration 
of  reserves  in  the  Federal  reserve  banks  makes  possible 
this  reduction  in  reserves  with  a  gain  in  strength  for  the 
system  as  a  whole. 

A  second  advantage  is  the  rediscount  privilege  which  is 
open  only  to  member  banks.  The  degree  to  which  State 
banks  will  value  this  opportunity  depends  on  the  demand 
for  loans  in  their  communities  and  the  amount  of  eligible 
paper  which  they  carry.  Even  a  non-borrowing  bank  can 
conduct  its  business  with  greater  confidence  if  it  knows  that 
assistance  will  be  available  when  necessary.  Prior  to  the 
passage  of  the  Federal  Reserve  Act  it  was  regarded  as  a 
sign  of  weakness  for  a  bank  to  rediscount  paper  but  this  is 
no  longer  the  case.  The  officers  of  a  savings  bank  member 
of  the  system  in  the  writer 's  native  town  bank  testify  to  the 
value  of  the  rediscount  privilege  during  seasons  of  excep- 
tional demand  on  the  country  bank  for  loans.  Bankers  gen- 
erally are  finding  a  larger  proportion  of  paper  eligible  for 
rediscount  than  they  thought  would  be  the  case.  During 
the  year  1918  three  hundred  and  thirty-three  Iowa  banks 
rediscounted  $385,191,839  worth  of  paper.  This  shows  that 
at  least  three-fourths  of  the  Iowa  member  banks  had  found 
this  privilege  valuable  even  before  the  period  of  crisis.^®* 

A  third  advantage  which  State  and  savings  banks  may 
gain  from  the  Federal  reserve  system  is  the  right  to  par- 
ticipate in  the  clearing  and  collection  system  inaugurated 
by  the  Federal  Reserve  Board.  The  framers  of  the  Fed- 
eral Reserve  Act  had  in  mind  the  possibility  of  applying  the 
principle  of  the  city  clearing  house  to  a  nation-wide  system. 
This  feature  was  not  put  into  operation,  however,  when  the 
Federal  reserve  banks  were  established  in  1914;  but  after 
some  experience  with  a  ** voluntary"  system  during  1915 


FEDERAL  RESERVE  SYSTEM  IN  IOWA  219 

and  1916  a  country-wide  system  of  clearing  checks  was  made 
effective  on  July  15,  1916.  Member  banks  were  not  re- 
quired to  use  the  facilities  of  the  clearing  plan,  but  they 
were  required  to  remit  without  deduction  for  checks  on 
themselves  sent  for  collection  by  the  Federal  reserve  banks. 
By  an  amendment  passed  on  June  21,  1917,  non-member 
banks  or  trust  companies,  which  would  maintain  a  clearing 
account  with  the  Federal  Reserve  Bank,  were  allowed  to 
participate  in  the  clearing  system.^^^  The  cost  of  operating 
the  clearing  system  was  at  first  borne  by  the  banks  using 
its  facilities;  but  beginning  with  July  1,  1918,  all  service 
charges  were  abolished. 

With  these  extensions  of  the  service  and  elimination  of 
expense  the  volume  of  clearings  materially  increased.  The 
average  number  of  items  handled  daily  by  all  of  the  Fed- 
eral reserve  banks  in  1917  was  approximately  276,000 ;  dur- 
ing the  period  from  October  15th  to  November  15,  1918,  the 
daily  average  was  828,000.  The  Federal  reserve  banks  at 
present  receive  at  par,  from  member  and  clearing  member 
banks,  checks  on  all  member  banks  and  other  banks  whose 
checks  can  be  collected  at  par.  By  means  of  the  gold-set- 
tlement fund  at  Washington,  inter-district  clearings  are 
also  affected.  In  this  way  member  banks  have  exchange 
facilities  throughout  the  entire  country  and  are  enabled  to 
keep  smaller  balances  with  correspondent  banks  at  various 
points. 

For  some  time  the  service  of  the  clearing  system  was 
hampered  by  the  lack  of  cooperation  on  the  part  of  non- 
member  banks.  Checks  on  banks  making  exchange  or  col- 
lection charges  could  not  be  cleared  or  collected  through 
Federal  reserve  banks.  This  clearing  system  will  not, 
therefore,  be  able  to  function  fully  until  checks  on  every 
bank  in  the  country  can  be  collected  at  par.  By  the  end  of 
1918  all  of  the  banks  in  the  Boston  and  New  York  districts 
were  on  the  par  list.     In  the  Chicago  district  there  were 


220  HISTORY    OF   BANKING   IN   IOWA 

1334  member  banks  and  2392  non-member  banks  on  the  par 
list  as  of  December  15,  1918.  Non-member  banks  not  re- 
mitting at  par  numbered  1805.  In  order  to  reduce  the  num- 
ber of  banks  in  the  latter  class,  personal  representatives  of 
the  Federal  Eeserve  Bank  of  Chicago  visited  the  non-par 
banks  of  the  district  during  1919.  In  Iowa  they  were  so 
successful  in  reducing  the  number  of  non-par  banks  that 
before  January  1,  1920,  the  entire  State  was  listed  as  par 
territory.  Non-member  banks  have  not  found  it  of  real 
advantage  to  maintain  a  clearing  account,  and  in  fact  only 
a  very  few  in  the  seventh  district  do  so  at  present. 

The  reason  for  the  refusal  of  some  banks  to  remit  at  par 
was  that  they  would  lose  thereby  the  profit  which  they  had 
been  accustomed  to  receive  from  their  exchange  charges. 
They  have  argued  in  the  past  that  these  charges  were  based 
on  what  it  would  cost  them  if  they  were  to  ship  currency. 
To  combat  this  argument  the  Federal  reserve  banks  agreed, 
after  October  1, 1918,  to  absorb  the  cost  of  postage,  express- 
age,  insurance,  and  other  expenses  when  shipments  of  cur- 
rency are  needed.  Stamped  letters  are  also  enclosed  with 
collection  letters  for  return  remittances.  With  the  facil- 
ities for  making  remittances  furnished  at  present  by  the 
Federal  reserve  banks,  there  seems  to  be  no  longer  any 
valid  argument  for  a  bank  refusing  to  remit  on  its  checks 
at  par. 

The  exchange  charging  banks,  nevertheless,  have  stren- 
uously opposed  the  efforts  of  the  Federal  reserve  banks  to 
establish  a  universal  system  of  par  collections.  When 
banks  refused  to  remit  for  their  checks  without  deduction 
for  exchange,  the  Federal  reserve  banks  arranged  to  collect 
their  checks  directly  through  an  agent.  On  January  21, 
1920,  the  Federal  Reserve  Bank  of  Chicago  reported  that 
seven  Iowa  banks  were  being  collected  through  the  express 
company  and  two  through  agents.  The  opposition  of  some 
Iowa  bankers  has  been  very  decided,  but  on  the  whole  such 


FEDERAL  RESERVE  SYSTEM  IN  IOWA  221 

opposition  has  not  equalled  that  of  other  sections  of  the 
country.  It  appears  that  the  competition  among  bankers 
had  already  largely  eliminated  the  practice  of  charging 
exchange. 

In  response  to  the  protest  from  State  chartered  banks,  the 
legislative  committee  of  the  Iowa  Bankers  Association  took 
up  the  matter  in  the  fall  of  1919.  It  was  found  that  only 
about  224  banks  were  not  paying  their  checks  at  par  when 
presented  by  the  Federal  Reserve  Bank.  In  order  to  give 
the  bankers  who  were  opposed  to  par  remittance  an  oppor- 
tunity for  organized  opposition  to  the  action  of  the  Federal 
Reserve  Board,  a  letter  was  sent  by  the  committee  suggest- 
ing that  a  meeting  be  called  for  this  purpose.  Only  seventy- 
nine  answers  were  received,  and  of  those  replying  forty- 
eight  stated  that  they  would  try  to  attend  such  a  meeting  if 
called.  Owing  to  this  very  apparent  lack  of  interest  the 
committee  concluded  that  it  was  not  justified  in  calling  the 
meeting.  Nevertheless  three  State  bankers  attended  a  na- 
tional conference  in  Washington  early  in  May,  1920,  called 
by  the  National  and  State  Bankers  Protective  Association. 
The  purpose  of  this  conference  was  to  bring  the  matter 
before  Congress  in  an  effort  to  secure  protective  legislation. 
No  immediate  results  were  secured. 

In  addition  to  individual  checks,  collection  items,  clearing- 
house notes  and  bills  and  miscellaneous  drafts  are  also 
handled  for  the  banks.  These  were  subject  to  a  service 
charge  of  ten  cents  per  item  until  July  1,  1918,  when  the 
Chicago  Reserve  Bank  suspended  the  service  charge  in 
order  to  stimulate  interest  in  this  feature  of  the  collection 
system.  During  the  six  months  ending  December  31,  1918, 
the  Bank  handled  an  average  of  twenty-two  items  of  this 
class  per  day  for  the  Iowa  banks. *^® 

Further  advantages  of  membership  to  State  banks  are 
that  the  capital  stock  is  a  tax-free,  six  per  cent  investment ; 
membership  adds  prestige;  and  government  deposits,  with 


222  HISTORY    OF    BANKING    IN    IOWA 

the  exception  of  postal  savings  deposits,  are  made  in  normal 
times  only  in  member  banks. *^^ 

Disadvantages  of  State  bank  membership  have  practically- 
all  been  eliminated  by  amendments  to  the  act  since  1914. 
The  right  of  State  banks  to  withdraw  upon  six  months  writ- 
ten notice  has  been  definitely  established.  State  banks  are 
allowed  to  retain  full  statutory  or  charter  rights  as  State 
banks  or  trust  companies,  even  to  the  extent  of  being  re- 
leased from  restrictions  of  section  eight  of  the  Clayton  Act, 
which  relates  to  joint  directorship.^^^  They  may  carry  loans 
for  a  single  individual  which  would  be  "excessive"  for  a 
national  bank  member,  the  only  restrictions  being  the  State 
law  and  the  prohibition  on  the  right  to  rediscount  that  indi- 
vidual's  paper  with  the  Federal  Reserve  Bank. 

State  bankers  frequently  object  to  becoming  members  of 
the  Federal  reserve  system  because  they  would  lose  thereby 
the  interest  on  their  reserve  account.  City  banks  have  cus- 
tomarily allowed  their  country  correspondents  a  low  rate 
of  interest  on  the  average  balance  carried.  The  Federal 
reserve  banks,  on  the  other  hand,  do  not  pay  any  interest 
on  balances  kept  with  them.  If  they  should  pay  interest, 
they  would  be  obliged  to  keep  a  large  proportion  of  their 
funds  employed  in  productive  investments.  This  would  im- 
pair their  strength  as  reserve  institutions  and  force  them 
into  competition  with  member  banks.  The  large  earnings 
of  the  Federal  reserve  banks  in  1918,  1919,  and  1920  have 
been  responsible  for  a  renewal  of  the  agitation  for  interest 
on  reserve  balances,  but  no  change  has  been  made.  Lower 
reserve  requirements  offset  in  some  degree  the  loss  of  in- 
terest; nevertheless,  this  objection  has  had  considerable 
weight  with  most  country  bankers. 

Moreover,  there  are  certain  services  which  the  city  cor- 
respondent renders  to  the  country  banker  which  the  Federal 
reserve  banks  are  not  in  a  position  to  duplicate.  Many  Iowa 
bankers  have  manifested  an  unwillingness  to  transfer  their 


FEDERAL  RESERVE  SYSTEM  IN  IOWA  223 

reserve  account  away  from  established  connections  and  in 
so  doing  break  up  valuable  business  relationships  of  long 
standing.  They  realize,  too,  that  many  of  the  advantages 
of  membership  can  be  secured  indirectly  through  the  city 
correspondent. 

The  capital  stock  requirement  is  a  definite  obstacle  to 
membership  in  the  way  of  many  State  banks  which  might 
otherwise  join  the  system.  The  State  bank  members  are 
required  to  meet  the  same  standards  as  those  prescribed  for 
national  banks.  This  of  itself  would  bar  hundreds  of  Iowa 
banks,  especially  of  the  savings  bank  group,  from  entering. 

NEW  POWEES  GEANTED  TO  NATIONAL  BANKS 

The  extension  to  the  State  chartered  banks  of  the  rights 
and  privileges  of  membership  in  the  Federal  reserve  system 
necessitated  modifications  in  the  direction  of  greater  free- 
dom and  scope  for  the  national  banks.  Note  issue  is  a  much 
less  valuable  privilege,  since  the  Federal  reserve  banks  will 
probably  supply  all  of  the  need  for  further  expansion  of 
bank  notes.  More  liberal  provisions  as  to  maximum  loans 
to  an  individual,  real  estate  loans,  trust  company  powers, 
and  savings  deposit  business  were  needed  in  the  national 
banking  law,  if  the  national  banks  were  to  find  it  advan- 
tageous to  retain  their  national  charters  and  new  banks 
were  to  incorporate  under  the  national  banking  law. 

Since  the  State  bank  members  can  not  rediscount  paper 
of  an  individual  whose  borrowings  aggregate  over  ten  per 
cent  of  the  capital  and  surplus  of  the  bank,  it  was  not 
deemed  necessary  to  make  any  change  in  this  feature  of  the 
national  banking  law.  In  regard  to  the  loans  on  real  estate, 
the  act  as  amended  on  September  7,  1916,  provides  that  na- 
tional banks  may  loan  on  improved  and  unencumbered  farm 
land  within  its  Federal  reserve  district,  or  within  one  hun- 
dred miles  of  the  bank  irrespective  of  district  lines.  The 
limit  of  the  loan  was  placed  at  one-half  the  value  of  the  land. 


224  HISTORY   OF    BANKING   IN   IOWA 

and  the  time  limit  at  not  over  five  years.  On  real  estate  as 
distinguished  from  farm  land  the  distance  limit  is  one  htin- 
dred  miles,  the  time  limit  one  year,  and  the  value  limit  is 
again  fifty  per  cent.  The  maximum  amount  of  such  loans 
by  any  bank  is  fixed  at  twenty-five  per  cent  of  its  capital 
and  surplus  or  one-third  of  its  time  deposits.^^^ 

Trust  company  powers  were  valuable  privileges  which 
had  been  extended  to  all  State  chartered  banks  by  the  Gen- 
eral Assembly  of  Iowa  in  1913.  Among  the  powers  con- 
ferred upon  the  Federal  Reserve  Board  by  the  Federal 
Reserve  Act  is  the  authority  to  '  ^  grant  by  special  permit  to 
national  banks  applying  therefor,  when  not  in  contravention 
of  State  or  local  law,  the  right  to  act  as  trustee,  executor, 
administrator,  or  registrar  of  stocks  and  bonds  under  such 
rules  and  regulations  as  the  said  board  may  prescribe. '  '^^'^ 

In  1915  the  General  Assembly  of  Iowa  granted  authority 
to  any  national  bank,  when  authorized  by  the  United  States 
law,  to  act  in  a  fiduciary  capacity  and  to  carry  on  a  safe 
deposit  business.^^^  By  this  act  trust  companies.  State, 
savings,  and  national  banks  were  all  placed  on  an  equality 
in  their  trust  company  powers.  The  validity  of  the  Federal 
act  granting  powers  to  the  national  banks  was  challenged  in 
two  or  more  States,  where  suits  were  instituted  to  test  its 
constitutionality. ^^2  Qn  June  11,  1917,  the  United  States 
Supreme  Court  handed  down  a  decision  reversing  the  de- 
cision of  the  Michigan  court  in  the  case  of  Bank  v.  Fellows. 
By  this  decision  the  Supreme  Court  sustained  the  right  of 
Congress  to  grant  to  national  banks  the  trust  company 
powers  enumerated  in  Section  11  (k)  of  'the  Federal  Re- 
serve Act.  Moreover  it  recognized  the  right  of  Congress  to 
modify  the  law  so  as  to  enable  national  banks  to  meet  the 
competition  of  State  chartered  banks.^"^ 

The  policy  of  the  Federal  Reserve  Board  regarding  the 
granting  of  trust  company  powers  has  been  very  conserva- 
tive.   Permits  are  granted  only  after  careful  examination  of 


FEDERAL  RESERVE  SYSTEM  IN  IOWA  225 

the  fitness  of  the  bank  to  exercise  fiduciary  functions.  By 
the  end  of  1917,  thirty-four  national  banks  in  Iowa  had  been 
granted  permits  to  exercise  trust  company  powers;  five 
more  were  added  to  the  list  in  1918,  fifteen  in  1919,  and 
eleven  in  1920.^*^^ 

In  order  to  clear  up  doubt  as  to  the  authority  of  the 
Board  to  bring  about  a  more  thorough  coordination  of 
banking  powers  as  between  State  and  Federal  institutions, 
an  amendment  was  passed  on  September  26,  1918,  to  Sec- 
tion 11  (k)  of  the  act,  enlarging  the  fiduciary  power  which 
may  be  granted  to  national  banks  so  as  to  include  authority 
to  act  ''as  guardian  of  estates,  assignee,  receiver,  committee 
of  estates  of  lunatics,  or  in  any  other  fiduciary  capacity  in 
which  State  banks,  trust  companies,  or  other  corporations, 
which  come  into  competition  with  national  banks,  are  per- 
mitted to  act  under  the  laws  of  the  State  in  which  the  na- 
tional bank  is  located.  "^^^ 

Savings  accounts  in  national  banks  were  encouraged  by 
the  lowering  of  reserve  requirements  against  this  class  of 
deposits.  By  the  terms  of  the  act  in  1913  a  reserve  of  five 
per  cent  only  was  required  against  time  deposits.  The  defi- 
nition of  this  class  of  deposits  was  that  ''time  deposits  shall 
comprise  all  deposits  payable  after  thirty  days,  all  savings 
accounts  and  certificates  of  deposit  which  are  subject  to  not 
less  than  thirty  days '  notice  before  payment ' '.  Postal  sav- 
ings deposits  were  included  in  this  class  in  1917  and  the 
required  reserve  reduced  to  three  per  cent.^^*^  Legitimate 
savings  business  is  now  more  profitable  for  national  banks 
than  formerly.  Coupled  with  the  lower  reserve  require- 
ment is  the  right  to  invest  one-third  of  all  time  deposits  in 
approved  loans  secured  by  real  estate.  The  national  banks 
were  given  the  additional  power  by  the  Federal  Reserve 
Act,  when  located  in  towns  having  a  population  of  5000  or 
less,  to  act  as  insurance  agent  or  as  agent  for  real  estate 
loans.^*'^ 

15 


226  HISTORY   OF   BANKING   IN   IOWA 

INFLUENCE  ON  IOWA  BANKING 

The  result  of  the  changes  brought  about  by  the  Federal 
reserve  system  in  Iowa  is  to  eliminate  many  of  the  differ- 
ences between  commercial  banks  of  whatever  name.  In  so 
far  as  a  banking  institution  engages  primarily  in  a  savings 
bank  business,  or  an  investment  business,  or  in  the  exercise 
of  trust  company  powers,  it  will  be  outside  the  range  of 
banks  affected  by  the  Federal  reserve  system.  The  com- 
mercial banks  of  the  State  have  been  unified  in  function  and 
method.  Not  only  member  banks  but  non-member  banks 
have  been  affected,  especially  through  the  operations  of  the 
Federal  reserve  clearing  system.  Moreover,  in  the  matter 
of  rediscounts  and  borrowings  the  non-member  bank  also 
feels  the  influence  of  the  new  banks.  The  Federal  reserve 
system  provides  a  market  for  commercial  paper.  Through 
the  city  correspondent,  who  is  a  member  of  the  system,  the 
country  banker  may  share  the  rediscount  privilege.  The 
published  discount  rates  of  the  Federal  reserve  banks  have 
brought  about  a  greater  degree  of  uniformity  in  discount 
rates. 

The  introduction  of  trade  and  bank  acceptances  will  do 
much  to  modify  banking  practice.  In  1913  national  banks 
were  granted  the  right  to  accept  drafts  or  bills  of  exchange 
drawn  upon  them,  having  not  more  than  six  months  to  run. 
At  that  time  bank  acceptances  were  limited  to  bills  of  ex- 
change based  upon  the  importation  or  exportation  of  goods, 
but  by  subsequent  amendment  bills  or  drafts  growing  out  of 
domestic  transactions  were  also  included.  In  1919  the  State, 
savings  banks,  and  trust  companies  of  Iowa  were  also  au- 
thorized to  accept  drafts.  Federal  reserve  banks  may 
rediscount  these  bankers '  acceptances  or  purchase  the  same 
in  the  open  market.  The  banker 's  acceptance  has  long  been 
a  familiar  credit  instrument  in  Europe,  but  it  was  little  used 
in  America  until  the  establishment  of  the  Federal  reserve 
system. '^^^ 


FEDERAL  RESERVE  SYSTEM  IN  IOWA  227 

Financial  leadership  of  the  Federal  reserve  system  and 
its  unifying  influence  upon  the  banking  machinery  of  the 
country  has  been  shown  in  the  way  the  emergency  of  war 
financing  has  been  met.  When  the  Federal  Reserve  Act  was 
passed  it  superseded  the  temporary  Aldrich-Vreeland  Act 
which  was  to  expire  by  limitation  on  June  30,  1914.  The 
framers  of  the  Federal  Reserve  Act,  however,  not  wishing 
to  leave  the  banks  without  the  possibility  of  issuing  emer- 
gency currency  in  case  the  new  act  was  not  in  readiness  for 
operation  by  June  30th,  reenacted  certain  of  its  provisions 
and  extended  them  one  year.^°^  Fortunate  indeed  was  it 
that  this  precaution  was  taken,  although  few  of  its  sponsors 
could  have  foreseen  the  emergency  that  was  to  make  it  use- 
ful. The  outbreak  of  the  World  War  in  Europe  came  just 
at  the  time  when  the  Federal  reserve  system  was  being  or- 
ganized. In  the  strain  of  the  readjustment  of  international 
finance  heavy  demands  were  made  on  the  banks  of  the  coun- 
try. The  emergency  currency  authorized  under  the  Aldrich- 
Vreeland  Act  filled  the  gap  until  the  Federal  reserve  banks 
could  be  put  into  operation. 

The  Aldrich-Vreeland  Act  as  amended,  provided  for  the 
formation  of  national  currency  associations.  In  Iowa  such 
an  association  was  formed  and  issued  to  the  national  banks 
of  the  State  over  $3,000,000  of  currency  early  in  the  fall  of 
1914.  This  was  especially  needed  in  counties  where  the  live 
stock  quarantine,  due  to  the  foot  and  mouth  disease,  was 
enforced.^^^ 

On  November  16,  1914,  the  Federal  reserve  banks  began 
actual  operations.  They  were  organized  too  late  to  assist 
in  meeting  the  first  shock  of  the  European  war  but  the  Fed- 
eral Reserve  Board  had  been  appointed  earlier  and  had 
assumed  a  position  of  leadership  in  the  first  stages  of  finan- 
cial readjustment.  As  the  months  passed  and  war  between 
the  United  States  and  Germany  seemed  imminent,  the  Board 
directed  the  policy  of  the  Federal  reserve  system  so  that  it 


228  HISTORY   OF    BANKING   IN   IOWA 

might  be  prepared  to  meet  the  financial  problems  of  the  war. 
When  the  United  States  finally  entered  the  war  in  April, 
1917,  the  Federal  reserve  banks  were  in  excellent  condition 
with  vast  stores  of  gold  and  surplus  reserves  with  which 
to  extend  credit  wherever  needed. 

The  new  functions  performed  by  the  Federal  reserve 
banks  during  the  war  brought  them  into  intimate  contact 
with  all  the  banks  in  their  districts.  As  a  means  of  adver- 
tising the  services  of  the  Federal  reserve  system,  the  war 
accomplished  in  a  few  months  what  would  normally  have 
taken  years.  It  would  seem  that  the  system  has  so  amply 
justified  its  place  as  the  centralizing  factor  in  American 
banking  as  to  warrant  all  eligible  State  banks  in  entering. 


XI 

BUILDING  AND  LOAN  ASSOCIATIONS 

The  Code  of  1897  defines  institutions  treated  under  the 
general  title  of  *' Building  and  Loan  Associations"  as,  ''cor- 
porations organized  for  the  purpose  of  furnishing  money  to 
their  members  upon  sufficient  security".  As  implied  by  this 
definition  the  purpose  of  building  and  loan  associations  is 
primarily  to  serve  the  borrower,  usually  a  home  builder  or 
purchaser.  They  are  allowed  to  receive  deposits  but  musi 
issue  shares  of  stock  for  the  same.  Borrowers  are  also  re- 
quired to  take  out  shares  having  a  maturity  value  equal  to 
the  amount  of  the  loan.  This  being  the  case,  building  and 
loan  associations  are  strictly  cooperative  institutions. 
Technically  they  are  not  banks,  being  prohibited  by  statute 
from  transacting  a  banking  business.  They  are,  however, 
important  and  successful  financial  institutions,  supplement- 
ing and  being  closely  connected  with  banking  activities, 
under  special  State  regulation  which  makes  it  necessary  to 
give  them  some  consideration  in  this  study. ^" 

OEIGIN  AND  GEOWTH  OF  THE  BUILDING  AND  LOAN  MOVEMENT 

Building  and  loan  and  savings  and  loan  associations  ex- 
isted in  England  as  early  as  1789,  the  earliest  association  of 
which  we  have  a  full  account  being  the  Union  Building  As- 
sociation of  Greenwich,  England,  established  in  January, 
1809.  Its  purpose  was  to  raise  funds  by  monthly  subscrip- 
tions to  be  expended  in  building  houses.  Each  share  in  this 
association  represented  a  house  built  under  the  direct  super- 
vision of  the  society.  When  houses  were  furnished  they 
were  distributed  among  the  members  by  lot.  A  member  suc- 
cessful in  the  drawing  was  compelled  to  give  satisfactory 
security,  continue  payments  on  his  share,  and  pay  five  per 

229 


230  HISTORY  OF  BANKING  IN  IOWA 

cent  interest  to  the  society  until  all  had  secured  homes.^^^ 
The  first  association  in  the  United  States  was  organized 
at  Frankford — then  a  suburb  of  Philadelphia,  Pennsylva- 
nia, but  now  incorporated  in  the  city — on  January  3,  1831, 
under  the  name  of  the ' '  Oxford  Provident  Building  Associa- 
tion ' '.  It  followed  the  English  models  in  general  principles, 
and  its  organization  was  probably  due  to  the  efforts  of 
English  workmen.  A  few  years  later  associations  were 
formed  in  Brooklyn  and  Baltimore.  Soon  they  spread 
somewhat  generally  throughout  the  country.  In  Massachu- 
setts the  building  and  loan  associations  are  known  as  co- 
operative banks;  in  Louisiana  they  are  called  homestead 
associations. 

The  first  comprehensive  report  of  the  development  of  the 
movement  in  the  United  States  made  by  the  Department  of 
Labor  in  1893,  shows  that  the  period  of  most  rapid  growth 
in  number  of  associations  was  during  the  decade  1880-1890. 
The  total  number  of  associations  in  1893  was  5838.  This 
number  increased  slightly  in  the  following  years,  being  5975 
in  1896.  Then  followed  a  period  of  steady  decrease  in  num- 
bers, the  total  at  the  time  of  the  next  report  in  1903  being 
5350.  This  was  accompanied  by  a  decline  also  in  total  assets 
from  $651,544,641  in  1896  to  $599,550,855  in  1903.  The  years 
since  1903  have  witnessed  a  slow  growth  in  the  number  of 
associations  but  a  remarkable  increase  in  financial  impor- 
tance.^^^  In  1918  the  total  assets  of  the  7484  associations  in 
America  were  $1,898,344,346,  while  the  members  numbered 
4,011,401.  In  number  of  members  and  total  assets  of  asso- 
ciations, Pennsylvania  and  Ohio  are  well  in  the  lead  of  the 
other  States,  followed  by  New  Jersey,  Massachusetts,  Illi- 
nois, New  York,  and  Indiana.  Iowa  ranked  nineteenth  in 
1918,  but  there  was  a  decided  difference  between  the  leading 
States  and  those  rating  near  Iowa  in  the  list.  Ohio  had  723 
associations  with  assets  of  $359,559,538;  while  Iowa  had 
only  57  associations  with  assets  of  $12,385,755.^^* 


BUILDING  AND  LOAN  ASSOCIATIONS  231 

No  legislation  concerning  building  and  loan  associations 
was  enacted  in  Iowa  until  1872,  and  the  law  at  that  time 
merely  authorized  the  incorporation  of  cooperative  and 
mutual  loan  associations  and  permitted  them  to  carry  on 
their  business  under  the  general  incorporation  law.  The 
usury  law  was  held  not  to  apply  to  the  cost  of  loans  made  by 
the  associations,  which  might  include  premiums  and  fines ; 
but  they  were  limited  for  current  expenses  to  ten  per  cent  of 
the  earnings.  The  remainder  of  the  earnings  must  be  placed 
to  the  credit  of  shareholders.  No  reports  were  called  for  or 
further  supervision  provided. ^^^  This  statute  remained  as 
the  only  legislative  provision  until  1896  when  comprehen- 
sive regulations  were  enacted  and  all  such  associations  were 
required  to  report  annually  to  the  State  Auditor.^^®  Be- 
ginning with  1897,  therefore,  the  official  records  are  com- 
plete; while  for  the  period  before  that  time  continuous 
statistics  can  not  be  secured.  Meantime,  the  greatest  de- 
velopment of  the  movement  had  taken  place.  The  Auditor's 
report  in  1897  listed  117  associations — the  largest  number 
that  has  ever  been  reported.^^^ 

According  to  a  study  published  by  the  United  States  Com- 
missioner of  Labor  in  1893  the  oldest  association  then  in 
existence  in  Iowa  was  the  Perpetual  Building  Association 
of  Clinton,  which  was  organized  on  January  1,  1870.  The 
second  oldest  was  the  Keokuk  Loan  and  Building  Associa- 
tion, the  date  of  its  organization  being  March,  1872.  This 
association  still  continues  under  the  same  name  and  is  the 
oldest  Iowa  association  now  in  existence.  The  Perpetual 
and  two  other  Clinton  associations  formed  in  1873  have 
since  been  discontinued,  leaving  as  the  second  oldest  the 
Perpetual  Savings  and  Loan  Association  of  Cedar  Rapids 
founded  on  January  19,  1875,  which  in  1918  was  also  the 
largest  association  in  lowa.^** 

By  1893  eighty-nine  associations  were  in  operation  in 
Iowa.    Two  of  these  had  been  formed  before  1873;  nine,  in 


232 


HISTORY    OF    BANKING    IN    IOWA 


the  five  years  following;  twelve,  from  1879  to  1882;  twenty- 
four,  in  the  next  five  years;  and  forty-two,  from  1888  to 
1893.^^^  Comparing  these  statistics  with  the  Auditor's  fig- 
ures three  years  later,  it  is  evident  that  the  period  of  great- 
est growth  occurred  in  the  late  eighties  and  early  nineties. 
Table  IX  shows  the  steady  decline  in  number  of  associa- 
tions after  the  law  placed  them  under  the  Auditor's  super- 
vision in  1896. 

Table  IX 


Number  of  Budding  and  Loan  Associations 

IN  lOWA, 

1896-1918"« 

Year 

Total  Number 

Domestic-Local 

Domestic 

FOREIQN 

1896 

117 

87 

29 

1 

1898 

108 

79 

28 

1 

1900 

88 

63 

24 

1 

1902 

72 

65 

17 

1904 

60 

52 

8 

1905 

57 

46 

11 

1907 

48 

43 

5 

1909 

49 

45 

4 

1911 

47 

46 

1 

1913 

60 

50 

1915 

50 

50 

1917 

54 

54 

1918 

57 

57 

The  numbers  given  are  those  reporting  to  the  Auditor  as 
of  December  31st  in  each  year.  The  total  assets  of  the  117 
associations  in  1896  were  $12,565,465.  With  the  decline  of 
numbers  the  assets  also  declined  to  $5,656,569  in  1902. 
Thereafter  for  ten  years  the  Auditor's  reports  do  not  give 
a  record  of  the  total  assets.  In  1913  the  total  had  recovered 
to  $7,367,344  in  spite  of  the  further  decline  in  number  of 
associations.  By  the  end  of  1918  the  number  of  associations 
had  increased  only  seven,  but  the  total  assets  had  grown  to 
$12,385,755,  or  almost  seventy  per  cent  in  five  years. 


BUILDING  AND  LOAN  ASSOCIATIONS  233 

TYPES  OF  ASSOCIATIONS 

Two  general  types  of  associations  have  been  distinguished 
— local  and  national.  Their  business  has  been  conducted 
under  substantially  similar  methods,  but  the  field  of  opera- 
tion is  far  different.  The  local  association  confines  its  busi- 
ness to  a  small  community,  usually  the  city  or  county  in 
which  it  is  located;  the  national  association  is  ready  to  make 
its  loans  on  property  anywhere  or  sell  its  shares  to  anyone 
without  regard  to  his  residence.  Numerically  and  finan- 
cially the  local  associations  have  always  been  far  more  im- 
portant. In  1893,  when  the  United  States  Commissioner  of 
Labor  made  the  first  comprehensive  report  on  building  and 
loan  associations  covering  the  entire  country,  5598  local 
associations  were  reported,  as  compared  to  240  national  or- 
ganizations. The  average  size  of  the  national  associations 
was  considerably  greater,  the  average  number  of  share- 
holders per  association  being  1637.1  as  compared  to  244.5 
per  local  association. ^^^ 

The  leaders  of  the  building  and  loan  association  move- 
ment have  always  insisted  that  the  proper  field  of  opera- 
tions is  a  strictly  local  one.  Judge  Seymour  Dexter,  an 
authority  on  the  subject,  stated  his  views  in  an  address 
before  the  annual  meeting  of  the  United  States  League  of 
Local  Building  and  Loan  Associations  held  at  Cleveland  in 
1895  as  follows : 

In  my  own  thoughts  and  ideas,  the  building  and  loan  association 
is  a  local  institution,  and  the  principles  on  which  it  is  founded  do 
not  admit  of  unlimited  extension.  The  unparalleled  success  of  these 
associations  in  the  past  has  been  largely  due  to  the  fact  that  they 
were  local  and  neighborhood  institutions,  and  comparatively  small 
in  the  aggregation  of  capital  in  each.  The  moment  these  associa- 
tions become  extended  in  the  conduct  of  their  business  over  large 
territory,  that  moment  many  of  the  elements  of  safety  involved  in 
the  local  association  methods  are  necessarily  eliminated,  and  dan- 
gerous ones  substituted  in  their  place.    They  are  no  longer  genuine 


234  HISTORY    OF    BANKING    IN    IOWA 

building  and  loan  associations  because  no  longer  conducted  on  the 
methods  on  which  these  associations  have  won  their  success  and 
grown  into  fame. 

These  principles  of  the  true  building  and  loan  association, 
to  which  Judge  Dexter  refers,  he  set  forth  in  another  ad- 
dress and  included  officers  willing  to  serve  for  the  good  of 
the  association ;  shareholders  in  a  position  to  know  what  the 
association  is  doing  and  upon  what  securities  their  money  is 
being  invested;  and  shareholders  in  a  position  to  attend 
meetings  and  vote  in  person  for  officers  of  their  own  choice. 
He  held  that  all  these  elements  are  lacking  in  a  national  as- 
sociation, and  into  such  a  field  many  scheming  and  dishonest 
individuals  would  enter  unless  legally  restrained. ^^^ 

In  the  survey  made  by  the  Commissioner  of  Labor  in  1893, 
Iowa  is  credited  with  eighty-one  local  and  eight  national 
associations.  When  the  present  legal  classification  was 
adopted  in  1896  three  types  of  association  were  recognized 
by  the  statutes :  domestic-local  associations,  whose  business 
is  confined  to  the  county  wherein  is  situated  the  town  or  city 
which  is  the  principal  place  of  business;  domestic  associa- 
tions, which  may  operate  anywhere  within  the  State  or  in 
other  States ;  and  foreign  associations,  which  are  those  in- 
corporated under  the  laws  of  another  State.^^s 

At  the  time  of  the  last  published  report  all  of  the  Iowa 
associations  were  of  the  domestic-local  type.^^*  When  the 
first  annual  reports  were  made  to  the  Auditor  in  1897  there 
were  eighty-seven  domestic-local,  twenty-nine  domestic,  and 
one  foreign  association  operating  in  lowa.^^^  Of  these  the 
twenty-nine  domestic  associations  might  in  practice  have 
operated  as  local  associations,  but  undoubtedly  many  were 
of  the  national  type.  At  about  this  time  the  prejudice 
against  national  associations  led  the  various  States  to  enact 
stringent  restrictions  against  foreign  associations.  Ne- 
braska claims  the  honor  of  being  the  first  State  to  pass  a 
law  to  exclude  national  associations.^^^    This  legislation  was 


BUILDING  AND  LOAN  ASSOCIATIONS  235 

directed  principally  against  Iowa  and  Minnesota  companies 
which  by  their  methods  had  caused  Omaha  people  to  lose 
confidence  in  building  associations,  many  of  them  having 
lost  money  through  the  national  associations.  The  Iowa 
associations  centered  in  Des  Moines,  and  because  of  their 
methods  they  made  the  name  building  and  loan  '*a  by- 
word" in  that  city.  So  true  was  this  statement  that  Des 
Moines  was  unable  to  organize  a  local  of  the  true  co- 
operative type  until  1916.^^^ 

The  Iowa  legislation  of  1896  was  very  drastic  in  re- 
stricting the  operations  of  associations  of  this  type.  For 
some  years  there  was  a  marked  falling  off  in  number  and 
strength  of  these  institutions,  but  the  movement  was  puri- 
fied and  strengthened  and  is  once  more  growing  in  strength 
and  public  favor.  The  special  regulations  applying  to  the 
foreign  associations  included  a  requirement  that  these  as- 
sociations deposit  with  the  Auditor  of  State  $100,000  in 
bonds  or  other  securities  for  the  protection  of  resident 
shareholders.  They  were  further  required  to  furnish  the 
Executive  Council  with  a  copy  of  the  articles  of  incorpora- 
tion and  by-laws,  a  certified  copy  of  the  State  laws  under 
which  they  were  organized,  and  a  report  for  the  preceding 
year  showing  their  condition  in  detail.  Foreign  associations 
were  required  to  allow  legal  processes  to  be  served  by  mail 
at  the  home  office.  Amendments  to  articles  of  incorporation 
or  by-laws  must  be  filed  within  ten  days  after  adoption. 
Fees  were  much  heavier  than  for  the  local  organizations. 
They  were  required  to  pay  $100  for  the  application  to  do 
business ;  $50  for  the  certificate  of  authority  and  its  annual 
renewal ;  and  from  $3  to  $50,  according  to  assets,  for  filing 
the  annual  statement.  When  fees  imposed  by  other  States 
on  Iowa  associations  exceeded  the  Iowa  fees,  the  fees  in 
Iowa  were  to  be  increased  thereto  for  associations  chartered 
in  those  States.  A  fee  of  $25  for  the  certificate  of  authority 
and  each  renewal  and  $10  for  filing  each  annual  statement 


236  HISTORY    OF    BANKING    IN    IOWA 

was  imposed  on  domestic  associations.  The  only  fee  im- 
posed on  domestic-local  associations  was  $5  for  filing  each 
annual  statement.'^^*  In  1900  foreign  companies  were  pro- 
hibited from  doing  business  in  Iowa  unless  the  laws  under 
which  they  were  incorporated  were  in  substantial  agree- 
ment with  the  Iowa  laws  and  afforded  equal  protection  to 
shareholders.^^^  These  restrictions  and  public  dissatisfac- 
tion with  their  methods  drove  national  associations  from 
Iowa. 

MEMBEESHIP  IN  ASSOCIATIONS 

Any  number  of  persons,  not  less  than  five,  may  now  be  in- 
corporated as  a  building  and  loan  or  savings  and  loan 
association  under  the  general  incorporation  laws  of  the 
State.  The  capital  named  is  known  as  the  authorized  cap- 
ital, and  the  association  is  allowed  to  commence  business  as 
soon  as  one  hundred  shares  thereof  have  been  subscribed, 
provided  the  other  features  of  the  law  have  been  complied 
with.  Stock  is  either  installment  or  fully  paid.  The  original 
payment  on  installment  stock  may  be  as  low  as  fifty  cents ; 
hence  an  association  may  begin  business  with  a  very  small 
amount  of  paid  in  capital.  Usually  the  incorporators  name 
a  capital  far  in  excess  of  the  immediate  needs  of  the  busi- 
ness. For  instance,  one  Waterloo  association  with  assets 
of  $750,000  has  an  authorized  capital  of  $15,000,000.  The 
maximum  amount  of  stock  which  can  be  issued  to  one  indi- 
vidual is  $10,000  par  value  except  that  any  association  hav- 
ing assets  of  more  than  $1,000,000  may  issue  to  one  person 
stock  not  in  excess  of  one  per  cent  of  its  assets.  Since  bor- 
rowers are  limited  by  the  stock  they  must  buy,  this  limits  the 
amount  of  the  maximum  loan  as  well  as  the  maximum  de- 
posit. ^^^ 

Members  of  building  and  loan  associations  are  of  two 
classes — depositing  members  and  borrowing  members.  In 
the  earlier  associations  all  members  expected  at  some  time 


BUILDING  AND  LOAN  ASSOCIATIONS  237 

to  be  borrowers.  It  is  still  true  that  many  persons  who  are 
at  any  given  time  depositing  members  expect  eventually  to 
use  the  association  as  a  source  from  which  to  borrow.  There 
are,  however,  a  considerable  number  of  shareholders  who 
are  strictly  depositing  members.  Building  and  loan  asso- 
ciations are  mutual  or  cooperative  institutions.  No  stock- 
holder receives  special  returns  or  carries  special  responsi- 
bility in  case  of  loss.  All  investors  receive  shares  of  stock 
rather  than  certificates  of  deposit.  Shares  of  depositing 
members  may  be  fully  paid  or  bought  on  the  installment 
plan.  In  1893  about  twenty-six  per  cent  of  all  shareholders 
in  Iowa  associations  were  borrowers.  In  the  local  associa- 
tions approximately  thirty-four  per  cent  of  the  members 
were  borrowers ;  in  the  national  associations  of  Iowa  only 
about  fourteen  per  cent  of  the  members  were  borrowers. 
This  points  to  onf'  weakness  of  the  national  type  of  associa- 
tion :  it  was  not  devised  to  serve  the  borrower,  but  was  pro- 
moted rather  as  an  investment  proposition.  Only  a  small 
proportion  of  the  Iowa  members  own  fully  paid  stock;  on 
January  1,  1918,  the  Iowa  associations  were  liable  to  mem- 
bers for  $10,202,639  paid  on  installment  stock,  while  fully 
paid  stock  was  credited  with  only  $463,496.^^^ 

PLANS  FOE  ISSUING  SHARES 

Three  plans  for  issuing  shares  have  been  used.  In  the 
order  of  historical  development  these  are  the  terminating, 
the  serial,  and  the  permanent  (or  Dayton)  plans.  The 
earliest  associations  were  composed  of  groups  of  men  desir- 
ous of  building  homes  and  did  not  include  those  who  were 
strictly  depositing  members.  Under  the  terminating  plan  a 
certain  limited  number  of  shares  were  issued  in  a  single 
series.  The  life  of  the  association  was  limited  to  the  time 
it  took  the  shares  to  reach  their  matured  value.  Persons 
entering  after  the  date  of  the  first  issue  must  pay  back  dues. 
Frequently  as  the  shares  progressed  toward  maturity  it 


238  HISTORY    OF    BANKING    IN    IOWA 

became  difficult  to  get  all  the  money  loaned.  In  some  cases 
the  associations  resorted  to  forced  loans.  The  serious 
defects  of  this  plan  were :  first,  the  dissolution  of  the  asso- 
ciation when  the  stock  matured ;  second,  the  large  amount  of 
back  dues  which  must  be  paid  by  a  new  stockholder;  and 
third,  the  necessity  of  making  forced  loans. 

The  serial  plan  was  then  developed  to  meet  these  obvious 
defects.  Under  this  plan  a  new  series  was  started  at  reg- 
ular intervals.  In  this  way  the  association  became  per- 
petual, back  dues  were  made  small,  and  usually  there  were 
no  forced  loans.  Ordinarily  the  series  were  conducted  sep- 
arately, amounting  in  effect  to  so  many  terminating  associa- 
tions. This  proved  a  cumbersome  and  in  some  ways  unsatis- 
factory method.  It  made  necessary  unvaried  payments 
when  frequently  a  member's  circumstances  would  change 
greatly  during  the  years.  He  had  no  inducement  to  pay 
more  rapidly,  but  was  fined  for  delay.  In  most  serial  asso- 
ciations withdrawal  of  shares  at  maturity  has  been  required. 
This  involves  loss  of  members  when  the  money  is  needed  to 
make  loans  and  requires  the  expensive  process  of  collecting 
a  larger  sum  to  meet  an  entire  series  in  one  payment. 

The  next  plan  in  order  of  development  was  the  perma- 
nent, or  Dayton  plan.  This  plan  was  first  adopted  by  the 
Mutual  Home  Association  of  Dayton,  Ohio,  in  1875,  and 
was  evolved  by  Judge  A.  A.  Winters.^^^  Its  main  features 
are  that  new  members  may  be  admitted  at  any  time  without 
back  dues,  and  shares  may  be  issued  either  in  installments 
of  fully  paid-up.  The  permanent  plan  makes  unnecessary 
the  assessment  of  fines  or  penalties  for  failure  to  pay  the 
regular  weekly  or  monthly  installments.  Experience  has 
shown  that  most  members  exceed  the  regular  rate  of  pay- 
ment. Dividends  are  computed  on  the  amount  each  member 
has  actually  paid  in,  and  earnings  are  credited  to  the  stock- 
holders semi-annually.  The  association  may  lay  aside  a 
certain  percentage  of  the  profits  each  year  as  a  contingent 


BUILDING  AND  LOAN  ASSOCIATIONS  239 

fund  or  reserve  to  meet  losses.^^^  When  the  dividends  have 
been  computed  and  placed  to  a  member's  credit  he  may,  if  a 
non-borrower,  withdraw  the  same  under  the  same  conditions 
as  his  cash  payments.  Dividends  on  paid-up  shares  may  be 
paid  to  the  holder  in  cash. 

In  189.^  the  division  of  associations  in  Iowa  according  to 
the  plan  of  issuing  shares  showed  that  of  the  eighty-nine 
associations  fifty-nine  were  serial,  twenty-three  were  per- 
manent, and  seven  were  terminating.^^*  The  serial  plan  is 
still  used  in  Iowa,  but  not  extensively.*^^ ^  It  is  worthy  of 
note  that  while  many  associations  change  from  the  serial 
to  the  permanent  plan,  none  change  from  the  permanent  to 
the  serial. '^^^ 

DISTRIBUTION  OF  PROFITS 

Profits  of  building  and  loan  associations  come  largely 
from  interest  on  loans.  Formerly  the  associations  added 
considerable  income  from  premiums,  entrance  fees,  fines, 
withheld  profits  of  withdrawing  members,  and  other  sources 
which  have  been  largely  eliminated  in  the  progressive  asso- 
ciation. The  Iowa  law  does  not  specify  the  manner  in  which 
profits  shall  be  distributed  beyond  requiring  that  associa- 
tions shall  not  issue  any  forms  of  preferred  or  guaranty 
stock.  Fully  paid  stock,  in  the  certificate  of  which  a  maxi- 
mum rate  of  dividend  may  be  named,  can  be  issued  upon  the 
payment  by  the  holder  thereof  of  the  par  value  of  such 
stock.  In  no  case  can  the  dividend  on  such  a  stock  exceed 
eight  per  cent  or  the  rate  of  dividend  declared  upon  the 
other  stock  of  the  association.  The  law  permits  the  appor- 
tionment of  the  net  earnings  quarterly,  semi-annually,  or 
annually. °^^  The  practice  of  the  larger  Iowa  associations  is 
to  declare  dividends  semi-annually  at  the  end  of  June  and 
December.  From  the  net  earnings  of  a  period  the  directors 
first  set  aside  a  small  percentage  of  the  profits  as  a  contin- 
gent fund  against  losses.    The  articles  of  incorporation  of 


240  HISTORY    OF    BANKING    IN    IOWA 

the  Perpetual  Savings  and  Loan  Association  of  Cedar  Rap- 
ids specify  that  three  per  cent  of  the  net  earnings  shall  be 
set  aside  as  a  contingent  fund.  The  Waterloo  Building  and 
Loan  Association  sets  aside  one  per  cent  for  such  a  fund.^^^ 
Dividends  on  installment  stock,  whether  of  a  depositing  or  a 
borrowing  member,  are  credited  to  the  stock,  thereby  aiding 
to  mature  the  shares.  Where  the  stock  is  fully  paid  the 
dividends  may  be  withdrawn  in  cash. 

In  order  to  protect  shareholders  against  the  possibility  of 
profiteering  by  officers,  the  Iowa  law  limits  very  rigidly  the 
expenditures  for  management.  A  graduated  percentage 
scale  of  expenses  to  assets  is  fixed,  beginning  with  three  per 
cent  in  case  the  assets  are  not  in  excess  of  $100,000  and 
going  down  to  one  per  cent  for  associations  with  assets  in 
excess  of  $1,000,000. ^^^  As  a  matter  of  fact  the  ratio  for  all 
associations  at  the  last  report  was  about  one  and  three- 
tenths  per  cent.^^*^  Even  the  larger  associations  have  very 
modest  quarters  and  pay  very  moderate  salaries.  It  is  the 
opinion  of  the  writer  that  some  of  these  associations  could 
profitably  expend  additional  amounts  for  more  convenient 
and  attractive  locations.  People  are  so  accustomed  to  see- 
ing elaborate  buildings  for  banking  and  financial  institu- 
tions that  they  discount  somewhat  the  importance  of  an 
association  that  is  housed  in  a  back  room  with  some  other 
business  concern.  The  limitation  of  expenses  has  doubtless 
been  a  factor  in  enabling  the  associations  to  pay  good  divi- 
dends. Records  available  show  annual  dividends  paid  by 
Iowa  associations  of  from  six  to  seven  and  eight-tenths  per 
cent,  distributed  semi-annually. ^^^ 

From  the  report  of  the  Commissioner  of  Labor  in  1893  it 
is  seen  that  the  total  loss  through  foreclosure  of  mortgages 
during  the  entire  life  of  the  5440  associations  then  reporting 
was  less  than  $500,000.^^ ^  ^ith  the  added  experience  and 
increased  safeguards  it  is  safe  to  assume  that  the  losses 
of  the  associations  in  existence  at  the  present  time  are  even 


BUILDING  AND  LOAN  ASSOCIATIONS  241 

smaller  than  they  were  for  those  twenty-five  years  ago.  The 
experience  of  many  persons  in  Iowa,  however,  with  badly 
managed  national  associations  has  prejudiced  them  against 
the  safety  of  building  and  loan  associations.  The  facts  seem 
to  be  that  the  present  local  associations  are  quite  as  safe  as 
the  savings  banks.  Officers  and  directors  of  banks  in  some 
cities  are  connected  with  the  associations  and  have  been 
influential  in  promoting  them. 

WITHDEAWAL  OF  MEMBERS 

In  earlier  times  the  withdrawal  of  members  was  not  per- 
mitted by  most  associations.  Failure  to  complete  the  pay- 
ments forfeited  all  payments  as  well  as  all  profits;  but 
greater  liberality  was  soon  demanded,  and  under  the  Dayton 
or  permanent  plan  of  issuing  shares  this  can  be  readily  pro- 
vided. The  Iowa  law  prescribes  that  the  terms  of  with- 
drawal must  be  such  that  a  member  will  receive  a  sum  not 
less  than  he  has  paid  into  the  association  unless  losses  have 
occurred  to  the  association  during  the  time  the  withdrawing 
member  was  a  shareholder.  In  case  the  losses  exceed  the 
profits,  or  any  fund  created  with  which  to  pay  losses,  "the 
withdrawing  member  shall  be  charged  with  his  propor- 
tionate share  of  the  excess  of  the  losses  over  the  profits, 
and  no  more."^*^ 

Nothing  is  said  in  the  State  law  regarding  the  disposition 
of  the  accumulated  profits  of  the  withdrawing  member.  The 
regulations  regarding  withdrawals  are  usually  found  in  the 
constitution  or  by-laws  of  the  association.  Some  proportion 
of  the  profits  on  shares  is  often  retained,  which  serves  to 
discourage  withdrawals.  Notice  of  withdrawal  is  usually 
required,  associations  reserving  the  right  to  ask  thirty  to 
sixty  days  time  before  payment.  Applications  are  usually 
acted  upon  in  regular  order.  If  sufficient  funds  are  on  hand 
to  permit  withdrawal  without  notice,  the  association  does 
not  take  advantage  of  the  provision  requiring  that  notice 

16 


242  HISTORY    OF    BANKING    IN    IOWA 

be  given.  Usually  only  a  certain  portion  of  the  weekly  or 
monthly  receipts  of  the  association  may  be  used  to  meet  the 
demands  of  withdrawing  members.  In  the  Waterloo  and 
Cedar  Rapids  associations  this  amount  can  not  exceed  one- 
half  of  the  receipts  of  the  period.^^* 

The  methods  of  crediting  profits  to  withdrawing  members 
vary  widely.  At  the  time  of  the  extensive  investigation  of 
the  building  and  loan  associations  made  by  the  Department 
of  Labor  in  1893,  twelve  principal  withdrawal  plans  were 
found  to  be  in  use.  Only  four  per  cent  of  the  local  associa- 
tions reporting  did  not  allow  any  interest  or  profit  to  with- 
drawing shareholders.  In  about  thirty  per  cent  of  the  asso- 
ciations shareholders  received  the  dues  paid  in  and  also  all 
of  the  accumulated  profits.  Thirty-one  per  cent  allowed  the 
withdrawing  shareholders  a  fixed  rate  of  interest,  usually 
six  per  cent  on  all  payments.  In  the  others  some  arbitrary 
or  graduated  scale  of  allowing  profits  was  found.^^^ 

At  present  Iowa  associations  differ  as  to  the  rules  for 
withdrawal.  In  this  respect,  as  in  many  others,  the  practice 
of  the  different  associations  can  be  determined  only  by  a 
study  of  their  articles  of  incorporation  and  by-laws.  The 
leading  cities  of  the  State,  in  the  number  and  size  of  their 
building  and  loan  associations,  are  Waterloo  and  Cedar 
Rapids,  the  assets  of  the  four  associations  in  the  former 
city  aggregating  slightly  more  than  those  of  the  three 
associations  in  the  latter.  The  combined  assets  of  the  seven 
associations  in  the  two  cities  were  $6,957,152.81  at  the  time 
of  the  1918  report.  This  represented  about  sixty  per  cent 
of  the  total  assets  of  $11,659,195.86  reported  by  all  of  the 
Iowa  associations.  Because  of  their  dominant  position  and 
because  of  their  accessibility  to  the  writer,  the  associations 
of  those  cities  will  be  frequently  referred  to  concerning 
points  upon  which  information  is  not  available  for  all  asso- 
ciations of  the  State. 

The  treatment  of  withdrawing  members  differs  consider- 


BUILDING  AND  LOAN  ASSOCIATIONS  243 

ably  in  the  different  associations.  In  the  largest  Iowa  as- 
sociation, the  Perpetual  of  Cedar  Rapids,  the  withdrawing 
members  receive  all  of  the  installments  paid  *  *  together  with 
the  dividends  then  standing  to  the  credit  of  their  shares". 
Members  withdrawing  immediately  after  the  declaration  of 
the  January  or  July  dividends  receive  all  accumulated 
profits.  No  earnings  are  credited  for  less  than  a  six  months 
period,  but  members  are  allowed  to  borrow  ninety  per  cent 
of  the  value  of  their  stock.  By  making  such  a  loan  until  the 
end  of  the  fiscal  period  they  may  secure  the  dividends."^ 
Waterloo  associations  return  all  of  the  installments  paid, 
but  graduate  the  payment  of  accumulated  profits  according 
to  the  length  of  time  the  stock  has  run.  In  the  Waterloo 
Building  and  Loan  Association  and  the  Perpetual  Building 
and  Loan  Association  of  Waterloo  sixty-six  and  two-thirds 
per  cent  of  the  dividends  are  paid  on  stock  that  has  run  less 
than  two  years ;  and  on  stock  that  has  run  over  two  years, 
withdrawing  members  may  receive  all  dividends  then  cred- 
ited to  the  stock.  In  the  Home  Building  and  Loan  Associa- 
tion of  Waterloo  a  more  extensively  graduated  scale  is  used. 
If  the  stock  is  under  twenty-four  months  old,  sixty  per  cent 
of  the  dividends  are  allowed ;  seventy  per  cent  is  paid,  if  the 
stock  is  over  twenty-four  months  and  under  thirty-six 
months,  seventy-five  per  cent  if  from  thirty-six  to  sixty 
months,  eighty  per  cent  if  over  sixty  and  under  ninety 
months,  ninety  per  cent  if  over  ninety  months,  but  not  to 
exceed  seven  per  cent  dividends  in  any  case  for  the  average 
time  the  money  has  been  in  the  hands  of  the  association.""^ 
Experience  and  the  opinion  of  building  and  loan  associa- 
tion officers  generally  seem  to  point  toward  a  considerable 
degree  of  liberality  in  the  matter  of  withdrawal  of  non- 
borrowing  members.  Primarily  the  association  is  to  enable 
members  to  become  home  owners,  but  it  does  not  seem  neces- 
sary nor  desirable  to  limit  its  activities  to  this  single  func- 
tion. Persons  may  wish  to  use  the  association  to  accumulate 


244  HISTORY   OF    BANKING   IN   IOWA 

a  fund  with  which  to  embark  in  business,  to  meet  some  ap- 
proaching obligation,  or  as  a  safe  depository  where  a  good 
rate  of  interest  can  be  secured.  The  majority  of  the  mem- 
bers are  not  borrowers;  and  while  the  depositing  member 
must  be  kept  subordinate,  there  is  no  reason  why  depositors 
should  not  be  welcomed  and  encouraged.  In  this  way  more 
funds  can  be  secured  for  loaning  purposes  and  the  service 
of  the  association  can  be  extended.  An  effective  way  t^^ 
accomplish  this  purpose  is  to  enable  members  to  withdraw 
on  rather  liberal  terms.  While  the  stricter  terms  may  pre- 
vent unnecessary  withdrawal  before  maturity  of  the  stock, 
it  also  discourages  many  persons  from  entering  because  of 
the  difficulty  of  getting  their  money  when  it  is  needed. 

More  encouragement  could  also  be  given  by  associations 
to  the  purchase  of  paid-up  stock  by  individuals  having 
money  for  investment.  In  this  way  the  association  would 
have  the  command  of  more  capital.  If  necessary  the  paid- 
up  stock  can  be  used  as  a  financial  regulator  since  the  State 
law  permits  and  the  articles  of  incorporation  of  most  asso- 
ciations provide  that  non-borrowing  members  may  be  forced 
to  withdraw  upon  notice  duly  given  by  the  directors.^** 
This,  however,  has  not  generally  been  necessary.  Except 
in  associations  with  assets  in  excess  of  $1,000,000  not  more 
than  $10,000  of  stock  computed  at  par  value  can  be  issued 
to  one  person.^^^  As  a  matter  of  fact  the  report  of  associa- 
tions having  a  considerable  amount  of  paid-up  stock  show 
that  this  is  not  held  by  capitalists  but  is  usually  in  small 
blocks.^^*^ 

PLAN  OF  MAKING  LOANS 

Borrowers  from  a  building  and  loan  association  are  re- 
quired to  buy  shares  equal  in  maturing  value  to  the  amount 
of  the  loan.  The  loan  is  allowed  to  run  until  the  borrower's 
payments  and  profits  mature  the  share,  when  his  stock  is 
surrendered  and  the  loan  cancelled.     It  has  been  urged 


BUILDING  AND  LOAN  ASSOCIATIONS  245 

against  this  plan  of  requiring  borrowers  to  assume  a  stock 
liability  in  addition  to  a  mortgage  obligation,  that  this  is 
needlessly  burdensome  and  expensive  to  the  borrower.  If 
losses  occur,  the  value  of  his  stock  is  reduced.  An  extreme 
case  might  arise  where  his  share  of  the  loss  would  equal  his 
credit  and  he  would  lose  the  entire  amount  on  his  loan  to 
date.  This  contingency,  however,  would  not  be  likely  to 
arise  in  practice. 

A  more  practical  disadvantage  of  this  arrangement  is  the 
fact  that  the  rate  of  interest  charged  the  borrower  is  higher 
by  about  one  per  cent  than  the  dividend  on  his  shares.  This 
amount  covers  expenses  of  the  business.  Where  the  bor- 
rower's credits  are  applied  to  the  reduction  of  his  debt  at 
each  annual  or  semi-annual  distribution,  rather  than  being 
placed  to  the  credit  of  his  shares  of  stock,  these  difficulties 
are  satisfactorily  met.  The  State  law  in  Iowa  requires  the 
associations  to  issue  stock  to  borrowers  ;^^^  at  the  same  time 
it  permits  owners  of  stock  to  withdraw  their  stock  credits 
or  any  part  thereof  at  any  time.  In  this  way  some  of  the 
Iowa  associations  have  met  this  problem  to  the  borrower's 
advantage.  When  the  withdrawal  value  of  the  shares  of  any 
member,  borrowing  on  a  real  estate  mortgage,  is  sufficient  to 
mature  one  or  more  shares  of  his  stock,  he  may  have  the 
amount  applied  to  such  shares  and  thus  reduce  the  amount 
of  his  loan  as  well  as  the  number  of  shares  upon  which  he 
makes  payment.  The  practice  of  such  associations  ia  to 
apply  stock  credits  on  loans  only  in  amounts  of  $100  or 
multiples  thereof.^^^ 

Loans  made  by  Iowa  building  and  loan  associations  have 
been  secured  almost  exclusively  by  real  estate  or  stock  of  the 
association.  At  the  time  of  the  investigation  by  the  Depart- 
ment of  Labor  in  1893  the  eighty-nine  Iowa  associations 
had  about  ninety-five  per  cent  of  their  loans  backed  by  real 
estate  security,  four  per  cent  by  stock  of  the  association, 
and  one  per  cent  by  other  securities.^^^ 


246  HISTORY    OF    BANKING    IN    IOWA 

Under  the  terms  of  the  law  passed  in  1896  Iowa  associa- 
tions were  limited  to  loans  secured  either  by  real  estate 
mortgages  or  by  their  own  shares  of  stock.  Real  estate 
loans  were  required  to  be  secured  by  a  first  mortgage,  or  by 
a  second  mortgage  in  case  the  association  also  held  the  first 
mortgage.  Loans  on  stock  might  not  exceed  ninety  per  cent 
of  the  withdrawal  value.**^*  The  law  did  not  place  a  limit 
on  the  percentage  of  appraised  value  of  the  real  estate  on 
which  an  association  might  loan,  but  it  did  require  that  all 
of  the  terms  of  making  loans  be  stated  in  the  articles  of  in- 
corporation and  by-laws  of  the  association.  The  Cedar 
Rapids  associations  may  loan  not  to  exceed  two-thirds  of  the 
appraised  value  of  the  realty,  while  the  Waterloo  associa- 
tions are  limited  to  sixty-five  per  cent  of  the  appraised 
value.^*^^  In  1918  the  reports  of  associations  submitted  to 
the  Auditor  show  a  total  of  loans  secured  by  real  estate 
aggregating  $11,122,909  and  stock  loans  of  $98,605.^5« 

Appraisement  of  the  real  estate  is  a  very  important  duty 
of  the  directors  of  the  association.  The  plan  followed  in 
the  Iowa  associations  may  be  briefly  described.  When  a 
member  applies  for  a  loan  the  president  appoints  an  ap- 
praisal committee  of  three  from  the  members  of  the  board 
of  directors.  They  are  required  to  examine  the  property, 
appraise  its  value,  and  state  in  writing  whether  or  not  the 
loan  applied  for  thereon  is  desirable.  The  board  of  di- 
rectors then  decides  whether  or  not  the  loan  shall  be  made. 
Care  is  exercised  to  place  loans  in  such  a  way  as  to  avoid 
loss  or  expense  and  delay  due  to  foreclosures.  The  bor- 
rower is  required  to  pay  the  costs  of  making  the  loan.  This 
includes  the  appraisers'  fee  (about  $1.50),  cost  of  abstract, 
expense  of  making  note  and  mortgage,  and  the  recording 
of  the  latter.  Aside  from  the  expenses  incurred  in  making 
the  loans,  Iowa  associations  are  prohibited  by  law  from 
charging  more  than  eight  per  cent  per  annum.  Moreover 
the  rate  of  interest  charged,  under  whatever  name,  must 


BUILDING  AND  LOAN  ASSOCIATIONS  247 

be  the  same  to  all  borrowers.  This  even  involves  making 
any  new  rate,  if  lower  than  the  prescribed  rate,  apply 
equally  to  all  who  have  theretofore  borrowed.'^^'^ 

EEPAYMENT  OF  LOANS 

Formerly  a  very  rigid  plan  of  repayment  of  loans  existed. 
Borrowers  were  fined  for  failure  to  make  regular  payments 
and  were  not  encouraged  to  pay  out  more  rapidly  than  the 
fixed  rate.  At  present  the  practice  concerning  fines  varies 
in  different  States.  Ohio  leads  in  having  practically  abol- 
ished fines;  Massachusetts  and  Pennsylvania  use  fines  for 
the  purpose  of  promoting  regularity  of  payment.^^*  The 
law  in  Iowa  permits  the  imposition  of  fines  for  delinquency 
not  to  exceed  three  cents  per  $100  share  for  the  first  month's 
delinquency  and  five  cents  per  share  for  each  succeeding 
month's  delinquency.  These  fines,  however,  must  come  out 
of  the  member's  profits  and  can  not  reduce  the  withdrawal 
value  of  any  share  below  the  amount  actually  paid  in.^^* 
It  is  generally  recognized  as  desirable  to  retain  the  right 
to  impose  fines  in  cases  of  mere  negligence  or  carelessness ; 
but  nearly  one-half  of  the  Iowa  associations,  including  the 
largest  ones  in  the  State,  do  not  show  any  receipts  from  this 
source  in  their  1918  reports.  The  total  of  fines  collected 
during  1917  by  all  of  the  Iowa  associations  was  only  $3856 ; 
and  in  1915  only  $1952  were  collected  in  fines.'^®'^ 

In  case  the  borrower  does  not  meet  his  interest  payments, 
the  mortgage  on  his  property  may  be  foreclosed  under  terms 
prescribed  in  the  by-laws  of  the  association.  The  associa- 
tions allow  about  three  months  delinquency  before  foreclos- 
ure proceedings  are  instituted.  By  the  terms  of  the  Iowa 
statutes  the  mortgagor  can  not  be  charged  more  than  the 
agreed  rate  of  interest,  never  in  excess  of  eight  per  cent. 
He  must  be  credited  with  all  payments  and  a  legitimate 
share  of  the  earnings  of  the  association.    In  any  case  where 


248  HISTORY    OF   BANKING   IN   IOWA 

suit  is  brought  for  an  excessive  amount,  the  costs  may,  in 
the  discretion  of  the  court,  be  taxed  to  the  plaintiff.^^^ 

Repayment  of  loans  in  the  building  and  loan  associations 
is  accomplished  by  paying  out  on  shares  of  stock  on  an  in- 
stallment basis.  A  typical  loan  of  $1000  would  require  the 
purchase  of  ten  shares  of  stock  at  $100  each.  Assuming 
an  interest  rate  of  7.02  per  cent,  the  rate  of  one  of  the  large 
associations,  the  borrower's  interest  payment  would  be 
$70.20  per  year.  Stock  payments  of  $1.50  per  week  added  to 
the  interest  payments,  which  are  usually  reduced  to  a 
monthly  or  weekly  basis  also,  will  discharge  the  debt  in  nine 
and  one-half  years  if  the  stock  earns  six  per  cent  dividends. 
Although  the  payments  are  usually  figured  on  a  weekly 
basis,  the  experience  of  the  association  whose  figures  have 
just  been  cited  is  that  the  bulk  of  stockholders  pay  monthly 
rather  than  weekly. ^^^ 

The  advantage  of  this  plan  to  the  home  builder  with  a 
regular  weekly  or  monthly  income  lies  in  the  fact  that  the 
mortgage  fades  away  gradually,  whereas  if  he  takes  a 
straight  five  year  loan,  with  interest  payable  annually  or 
semi-annually,  the  face  value  of  the  mortgage  is  seldom  re- 
duced. Accumulation  of  amounts  of  $100  or  more  to  apply 
on  the  mortgage  are  difficult  to  make.  On  the  other  hand, 
small  monthly  amounts  will  be  met  and  the  sacrifice  will  be 
little  felt.  Herein  lies  the  chief  advantage  of  the  building 
and  loan  associations  to  the  borrower.  It  is  true  that  other 
agencies  make  loans  on  this  plan,  but  individuals  or  savings 
banks  usually  prefer  to  receive  the  interest  in  larger  in- 
stallments and  to  preserve  the  principal  intact  until  it  is 
paid  off  by  a  few  large  payments.  The  building  and  loan 
association  is  prepared  to  offer  this  easier  and  more  prac- 
tical plan  of  paying  for  a  home.  It  is  pointed  out  to  the 
prospective  borrower,  accustomed  to  paying  rent,  how  by  a 
small  addition  to  his  monthly  rental  payment  he  can  own  his 
home.    He  is  reminded  that  every  dollar  spent  for  rent  is 


BUILDING  AND  LOAN  ASSOCIATIONS  249 

gone  forever,  but  by  this  plan  eventually  he  has  a  home  of 
his  own.  As  to  the  feasibility  of  the  plan  there  can  be  no 
question. 

When  it  comes  to  a  question  of  cost  of  repayment  of  a 
loan  on  the  above  system,  there  is  not  so  much  to  be  said  in 
favor  of  the  building  and  loan  association.  The  rates 
charged  in  Iowa  have  been  from  seven  to  eight  per  cent  in 
recent  years,  somewhat  higher  than  current  rates  charged 
by  other  lenders  on  similar  securities.  In  fact  this  is  justi- 
fied by  the  cost  of  the  service  rendered.  To  handle  repay- 
ment on  the  above  described  plan  is  costly  from  the  stand- 
point of  office  and  bookkeeping  charges,  and  this  constitutes 
one  of  the  chief  reasons  why  other  institutions  do  not  en- 
courage this  type  of  loan.  Again  the  cost  is  offset  in  a 
measure  by  the  liberal  rate  of  interest  earned  by  the  money 
deposited  by  the  borrower  as  stock  payments.  Under  the 
plan  followed  by  some  of  the  Iowa  associations  the  bor- 
rower, when  the  withdrawal  value  of  all  of  his  stock  is  suffi- 
cient to  mature  one  or  more  shares  of  his  stock,  may  have 
this  credited  directly  on  his  loan.  Thereafter  his  interest 
on  the  loan  would  be  less  and  his  liability  as  a  stockholder 
for  losses  be  reduced. 

It  must  be  clearly  borne  in  mind  that  the  actual  cost  of 
the  loan  is  the  rate  of  interest  paid,  not  the  difference  be- 
tween the  rate  paid  by  the  borrower  and  the  amount  he 
receives  in  interest  on  an  exchange  transaction.  For  in- 
stance, an  association  in  its  advertising  shows  that  the 
interest  payments  of  the  borrower  amount  to  $666.90  on 
$1000  for  nine  and  one-half  years  and  the  stock  payments 
$746.89,  making  total  payments  of  $1413.79.  The  with- 
drawal value  is  $1000  and  the  cost  of  the  loan  is  therefore 
stated  to  be  $413.79  which  for  nine  and  one-half  years  is  4.35 
per  cent  per  year.  Actually  the  loan  cost  $666.90  and  the 
deposit  is  a  separate  transaction.  An  illustration  will  make 
this  point  clearer.     Suppose  A  had  borrowed  the  $1000 


250  HISTORY    OF    BANKING    IN    IOWA 

from  an  individual  at  7.02  per  cent  for  a  nine  and  one-half 
year  period  and  at  the  same  time  had  purchased  stock  in  a 
building  and  loan  association  paying  dividends  semi-annu- 
ally of  three  per  cent.  At  the  end  of  the  period  he  would 
have  a  withdrawal  value  of  $1000  and  could  apply  the  same 
to  pajdng  his  debt.  The  cost  of  the  loan  is  here  clearly 
shown  to  be  the  total  interest  payments  of  $666.90.  The 
error  in  the  method  referred  to  is  in  assuming  that  the  bor- 
rower's savings  were  not  worth  any  interest  to  him  and  that 
what  he  received  as  interest  was  merely  a  gift.  This  as- 
sumption, however,  is  commonly  made  in  such  tables.^^^  The 
loan  from  an  individual  or  savings  bank,  if  at  a  lower  in- 
terest rate,  will  cost  less.  However,  the  nominal  interest 
rate  charged  is  often  not  the  actual  cost  of  a  term  mortgage. 
Often  a  cash  commission  is  charged  the  borrower  in  advance 
and  repeated  whenever  renewal  is  made,  usually  every  five 
years.  A  loan  once  made  with  a  building  and  loan  associa- 
tion has  no  further  expense  attached  until  the  final  satis- 
faction of  mortgage. 

Making  due  allowance  for  commissions,  renewal  expenses, 
and  other  incidental  expenses  of  the  term  mortgage,  it  is 
doubtless  true  that  lower  rates  can  usually  be  secured  from 
other  sources  by  persons  having  first-class  real  estate  to 
offer  as  security.  The  rate  charged  on  loans  in  Waterloo, 
where  four  live  associations  are  at  the  service  of  borrowers, 
is  eight  per  cent.  In  Cedar  Rapids  the  associations  charge 
7.02  per  cent.  The  newly  organized  Des  Moines  and  Iowa 
City  associations  charge  seven  per  cent.^^^  Straight  mort- 
gage loans  can  be  secured  in  these  cities  at  lower  rates ;  but 
in  spite  of  the  difference  the  plan  is  very  popular  and  a  large 
proportion  of  home  buying  and  building  in  "Waterloo  and 
Cedar  Rapids  has  been  financed  by  this  means.  The  ad- 
vantage of  installment  payments  is  accompanied  by  the  fact 
that  building  and  loan  associations  are  in  a  position  to  loan 
a  somewhat  larger  amount  on  the  property  with  safety. 


BUILDING  AND  LOAN  ASSOCIATIONS  251 

Banks  in  the  larger  towns  and  cities  in  Iowa  are  usually  un- 
willing to  loan  more  than  from  forty  to  fifty  per  cent  of  the 
value  of  city  real  estate. 

It  appears,  however,  that  high  interest  charge  to  borrow- 
ers has  been  one  cause  of  the  failure  of  Iowa  associations  to 
keep  pace  with  those  of  neighboring  States.  The  city  of 
Omaha  has  six  associations,  two  of  which  have  each  larger 
amounts  loaned  on  real  estate  than  all  of  the  Iowa  associa- 
tions together.  These  associations  have  gradually  reduced 
the  rate  charged  borrowers  :^rom  nine  and  six-tenths  per 
cent,  about  fifteen  years  ago,  to  six  and  six-tenths  per  cent. 
The  Omaha  associations  have  aided  in  the  erection  of  nine 
thousand  homes  during  the  past  fifteen  years. ^^^  Attracting 
less  necessitous  borrowers  by  a  more  favorable  interest  rate 
has  been  a  factor  in  popularizing  the  building  and  loan 
movement  in  Omaha. 

LOANS  TO  FAEMEES 

A  class  of  loans  which  might  be  attracted  by  lower  in- 
terest is  the  farm  mortgage  loan.  Iowa  associations  have 
confined  their  activities  to  the  towns  and  cities;  and  loans 
are  not  made  on  farm  land  or  farm  homes.  In  general  this 
has  been  true  of  the  associations  elsewhere,  but  a  consider- 
able advance  in  the  direction  of  taking  care  of  farm  loans  is 
found  in  other  States — ^notably  Ohio.  It  is  also  being  done 
by  associations  in  Indiana,  Kansas,  and  Nebraska.  The 
report  for  Ohio  on  June  30, 1916,  shows  that  the  associations 
of  the  State  had  in  force  9843  farm  loans,  amounting  to 
$21,621,952.71.  The  interest  rate  charged  in  Ohio  is  six  per 
cent  with  no  commission  added.^®^  Interest  is  payable  semi- 
annually ;  loans  are  made  for  one,  three,  or  five  years.  There 
is  a  provision  for  carrying  the  loans  for  a  longer  time  when 
overdue  than  in  the  case  of  city  property.  Deposits  by  farm- 
ers are  in  about  the  same  proportion  to  total  deposits  as  this 
class  of  loans  is  to  the  total.    In  other  words  this  adds  a 


252  HISTORY    OF   BANKING   IN   IOWA 

large  class  of  business  quite  distinct  and  able  to  provide  the 
funds  for  carrying  its  own  class  of  loans. ^^'^ 

In  an  address  before  the  Iowa  Building  and  Loan  League 
in  1917,  K.  V.  Haymaker  of  Detroit,  Michigan,  formerly  of 
Defiance,  Ohio,  strongly  urged  Iowa  associations  to  make 
their  privileges  available  to  the  farmers  of  their  communi- 
ties after  the  manner  of  the  Ohio  associations.  He  clearly 
pointed  out  the  necessity  for  adapting  the  plan  to  meet  the 
business  of  farming.  Sometimes  the  assumption  has  been 
made  that  weekly  or  monthly  payments  are  a  vital  feature 
of  the  building  and  loan  association.  He  asserted  that  the 
only  essential  is  regularity.  The  period  may  be  made 
monthly,  as  in  dairying,  semi-annually,  or  annually  accord- 
ing to  the  type  of  farming.  He  insisted  that  the  idea  of 
compulsory  payments  must  be  dropped,  fines  abolished,  and 
other  changes  effected  to  meet  the  conditions  of  farming. 
If  this  were  done  he  believed  that  the  field  of  operations 
could  be  greatly  widened,  as  has  been  the  case  in  Ohio.^^* 

The  question  of  the  extension  of  the  field  of  operations  of 
Iowa  associations  to  include  farm  loans  will  depend  on  cer- 
tain factors.  In  the  first  place  competition  is  entirely  too 
keen  to  make  it  necessary  for  Iowa  farmers  to  pay  a  high 
interest  rate  on  loans.  Insurance  companies,  mortgage 
banks,  savings  banks,  investment  companies,  individual 
lenders,  all  look  upon  Iowa  farm  mortgages  as  a  most  desir- 
able investment.  Added  to  these  are  the  national  farm  loan 
associations  and  joint  stock  land  banks  of  the  Federal  farm 
loan  system.  At  present,  rates  charged  by  these  companies 
range  from  five  and  one-half  per  cent  up.  Terms  of  re- 
payment are  usually  rather  liberal.  In  many  cases  com- 
missions are  charged  which  add  somewhat  to  the  net  cost 
of  the  loan;  but  even  considering  these  factors,  the  rates 
are  considerably  lower  than  those  granted  by  building  and 
loan  associations  to  their  members.  Certainly,  as  Haymaker 
has  said,  the  rules  of  associations  would  also  have  to  be 


BUILDING  AND  LOAN  ASSOCIATIONS  253 

adapted  to  the  needs  of  the  farming  business.  Until  the 
rates  and  conditions  are  changed  Iowa  associations  will  not 
find  a  field  for  operation  in  rural  credits. 

INSUEANCE  FOR  THE  PROTECTION  OF  BORROWERS 

A  difficult  problem  which  may  occasionally  confront  an 
association  is  the  necessity  for  foreclosing  on  property  in 
cases  where  the  death  of  the  wage  earner  makes  it  impos- 
sible for  a  family  to  continue  payments.  Ordinarily  the  as- 
sociation is  protected  by  the  security,  but  the  sale  of  prop- 
erty under  foreclosure  usually  results  in  serious  loss  to  the 
family.  Associations  in  some  States  have  met  this  problem 
by  arranging  for  special  life  insurance  policies  to  meet 
such  an  emergency.  This  type  of  policy  is  known  as  a 
"Diminishing  Term  Policy",  As  outlined  before  the  1917 
session  of  the  Iowa  Building  and  Loan  League,  this  plan 
provides  a  very  cheap  form  of  protection  especially  adapted 
for  taking  care  of  the  balance  of  payments  due  the  associa- 
tion in  the  event  of  the  borrower's  death.  The  face  value 
of  the  policy  decreases  as  payments  to  the  association  in- 
crease his  investment,  so  that  at  all  times  it  has  a  value,  in 
case  of  the  borrower's  death,  equal  to  the  balance  due  the 
building  and  loan  association,  if  payments  to  the  association 
have  been  regularly  met.  The  plan  contemplated  a  lump 
payment  in  advance  for  the  entire  cost  of  the  policy.  For 
instance,  a  ten  year  term  policy  of  this  type,  age  thirty-five, 
could  be  paid  for  by  a  single  gross  premium  of  $51.59  per 
$1000.  Payments  of  $8.33  per  month  on  the  principal  of 
the  loan  would  extinguish  the  debt  in  ten  years.  The  insur- 
ance policy,  therefore,  decreases  by  that  much  each  month. 
In  the  event  of  the  borrower's  death  the  mortgage  note 
would  be  stamped  ''paid"  and  the  home  handed  over  to  the 
family  clear  of  all  debt.  If  he  lived  the  home  would  be  paid 
for  in  the  regular  course  of  time,  the  extra  amount  added 
to  the  original  loan  not  being  sufficient  to  lengthen  mater- 


254  HISTORY    OF    BANKING    IN    IOWA 

ially  the  time  necessary  to  pay  out.  In  some  cases  the  secre- 
tary of  the  association  acts  as  the  agent  for  the  insurance 
company,  but  this  gives  rise  to  certain  complications.  In 
Omaha  the  building  and  loan  secretary  gives  a  list  of  bor- 
rowers to  all  insurance  companies  in  the  city.  Iowa  build- 
ing and  loan  associations  have  not  yet  undertaken  to  edu- 
cate the  borrowers  to  the  value  of  life  insurance  protec- 
tion.^«8 

MANAGEMENT  AND  CONTKOL  OF  ASSOCIATIONS 

The  ultimate  control  of  the  associations  rests  in  the  hands 
of  the  shareholders  or  members.  At  any  election  each  mem- 
ber has  one  vote  for  each  $100  share  of  stock  owned  by  him. 
Voting  may  be  by  proxy,  but  no  person  is  allowed  to  vote 
over  ten  per  cent  of  the  outstanding  shares  at  the  time  of 
the  election.  The  government  of  an  association  rests  with 
the  board  of  directors.  The  number  of  directors  is  not  spe- 
cified in  the  Iowa  law,  but  it  is  provided  that  they  shall  hold 
office  for  not  less  than  one  nor  more  than  five  years.  If 
directors  are  elected  for  a  longer  term  than  one  year  there 
must  be  annual  elections  with  as  nearly  as  possible  an  equal 
number  retiring  each  year.  The  directors  exercise  general 
supervision  and  direction  of  all  financial  affairs  of  associa- 
tions, and  they  elect  the  officers  and  have  power  to  suspend 
them  at  any  time.  All  loans  must  be  approved  by  the  direc- 
tors, and  they  declare  the  dividends.^^^  Directors  are 
usually  allowed  a  small  fee  for  attending  the  meetings  of 
the  board  and  compensation  for  services  rendered  outside 
of  the  meetings.  Ordinarily  the  directors  are  men  of  prom- 
inence in  the  business  and  financial  affairs  of  the  community 
who  could  scarcely  be  induced  to  give  their  services  for  the 
financial  reward  alone.  Unlike  the  directors  of  a  bank, 
who  are  usually  the  principal  stockholders  and  hence  di- 
rectly interested  in  the  bank's  financial  success,  these  men 
do  not  profit  even  from  the  larger  measure  of  success  of  the 


BUILDING  AND  LOAN  ASSOCIATIONS  255 

association.  It  is  largely  a  public  spirited  service  rewarded 
only  indirectly  through  the  greater  prosperity  of  the  com- 
munity and  the  welfare  of  its  citizens. 

The  active  executive  of  the  association  is  the  secretary. 
In  the  larger  associations  he  gives  his  full  time  to  the  ad- 
ministration of  his  duties  and  may  even  have  assistants. 
In  such  circumstances  he  is  paid  a  salary  for  his  services 
commensurate  with  his  ability.  He  receives  all  money  paid 
in  on  shares,  keeps  the  accounts  of  the  association,  and 
countersigns  all  certificates  for  sliares  of  stock,  contracts, 
and  conveyances  requiring  the  signature  of  the  president. 
The  money  he  receives  is  paid  over  to  the  treasurer,  usually 
a  banker,  and  orders  are  issued  by  the  secretary  payable  by 
the  treasurer.  He  acts  as  secretary  of  the  board  of  direc- 
tors and  as  custodian  of  the  securities,  books,  and  insurance 
policies.  He  reports  regularly  to  the  board  of  directors 
regarding  receipts  and  disbursements.  Semi-annually,  or 
of tener  when  so  required,  he  makes  a  full  financial  statement 
of  the  condition  of  the  business. 

In  large  measure  the  success  of  the  association  depends 
upon  the  qualities  of  the  secretary.  Coming  into  direct 
contact  with  the  shareholders,  his  manner  and  personality 
must  be  such  as  to  inspire  confidence  and  enable  him  to  at- 
tract and  hold  members.  He  is  required  to  give  bond  for 
the  faithful  performance  of  his  duties,  but  this  is  in  no  way 
a  substitute  for  character  and  capacity.  In  the  larger  asso- 
ciations he  is  assisted  by  others  whose  duties  are  purely 
clerical. ^"^^ 

In  addition  to  these  officers  there  is  the  treasurer  who 
acts  in  a  purely  ministerial  capacity.  He  receives  the  funds 
from  the  secretary,  gives  his  receipt  for  the  same,  and  pays 
out  the  money  on  orders  from  the  secretary.  Even  in  the 
matter  of  selecting  a  bank  for  the  depositing  of  cash  on 
hand  he  is  subject  to  the  advice  of  the  board  of  directors. 
Some  associations  retain  an  attorney  as  a  regular  officer 


256  HISTORY   OF    BANKING   IN   IOWA 

of  the  association  to  examine  titles,  make  out  the  legal  pa- 
pers, and  perform  other  duties  in  connection  with  the  legal 
aspects  of  the  business.  Accounts  must  be  regularly 
audited — a  duty  that  is  usually  performed  by  a  committee 
of  the  directors  appointed  for  that  purpose — but  sometimes 
a  single  qualified  individual  makes  the  audit. 

STATE  SUPERVISION 

The  first  effort  at  State  supervision  of  building  and  loan 
associations  in  Iowa  came  in  1872  through  legislation  per- 
mitting the  organization  of  associations  under  the  general 
corporation  laws.  They  were  empowered  to  collect  dues, 
fines,  interest  on  loans  advanced,  and  premiums  bid  by 
members  for  the  right  of  precedence  in  taking  loans;  to 
make  loans;  to  convey  real  estate;  and  to  do  other  things 
incident  to  their  business.  Out  of  the  earnings  they  were 
allowed  to  set  aside  ten  per  cent  for  current  expenses.  The 
remainder  of  the  earnings  were  to  be  credited  to  the  share- 
holders. The  usury  law  was  held  not  to  apply  to  those 
already  organized  or  to  those  to  be  organized  in  the  future. 
No  person  was  allowed  to  hold  more  than  twenty  shares.^^^ 
No  requirement  was  made  for  reports  or  examinations. 
State  supervision  can  hardly  be  said  to  have  really  begun 
until  twenty-five  years  later.  In  the  meantime  a  large 
growth  of  business  had  taken  place.  Effective  State  super- 
vision came  with  the  legislation  of  1896.  By  that  time  a 
hundred  associations  were  operating  in  Iowa.  A  consider- 
able number  of  foreign  companies  were  carrying  on  their 
business  in  a  manner  which  was  not  to  the  best  interests  of 
the  Iowa  investors.  State  supervision  with  its  consequent 
publicity  was  adopted  for  the  purpose  of  eliminating  those 
institutions  operating  primarily  in  their  own  and  against 
the  public  interest. 

In  the  first  place  the  statute  required  that  the  articles  of 
incorporation  of  building  and  loan  associations  must  be  ap- 


BUILDING  AND  LOAN  ASSOCIATIONS  257 

proved  by  the  Executive  Council.  The  articles  with  the  cer- 
tificate of  approval  attached  must  then  be  filed  with  the 
State  Auditor.  Any  amendments  to  the  articles  must  be 
handled  in  the  same  manner.  After  the  Auditor  received 
the  approved  articles  he  was  to  issue  a  certificate  author- 
izing the  association  to  commence  business.  Thereafter  the 
association  was  under  the  control  of  the  Auditor,  who  was 
required  to  examine  all  associations  at  least  once  a  year. 
This  examination  might  be  conducted  by  the  Auditor  or  by 
some  person  appointed  for  the  duty.  Examiners  were  em- 
powered to  summon  witnesses  and  procure  documents  nec- 
essary to  learn  all  facts.  Costs  of  the  examination  must  be 
paid  by  the  association,  a  fee  of  $5  per  day  and  expenses 
being  allowed.  In  no  case  could  an  association  be  required 
to  pay  over  $200  per  year  for  examination  costs.  Twenty 
shareholders  of  a  domestic-local  association  could  apply  to 
the  Auditor  for  examination,  in  which  case  he  must  make 
the  examination  under  the  same  conditions  as  the  regular 
periodic  examination.^'^' 

Annual  reports  were  required  of  all  associations.  These 
must  be  made  before  February  1st  on  the  business  of  the 
preceding  year  as  of  December  31st.  This  report  must  show 
the  following: 

1.  The  date  when  the  association  was  incorporated  and  the  par 
value  of  each  share  of  stock. 

2.  The  number  of  shares  sold  during  the  year. 

3.  The  number  of  shares  cancelled  or  withdrawn  during  the 
year. 

4.  The  number  of  shares  in  force  at  the  end  of  the  year. 

5.  A  detailed  statement  of  receipts  and  disbursements  showing 
specifically  from  what  source  received  and  in  what  manner  applied. 

6.  A  statement  of  the  assets  and  liabilities  at  the  end  of  the 
year. 

7.  The  salary  paid  to  each  of  its  officers  during  the  year. 

8.  All  foreign  building  and  loan  or  savings  and  loan  associa- 
tions shall  in  addition  to  the  above,  report  the  names  of  each  share- 

17 


258  HISTORY    OF    BANKING    IN    IOWA 

holder  of  such  association  residing  within  the  state  of  Iowa,  to- 
gether with  the  postoffice  address  of  each  and  the  number  of  shares 
owned  by  each  of  said  persons  on  the  first  day  of  January  pre- 
ceding, and  the  cash  value  of  each  said  shares  on  said  date. 

A  failure  to  report  promptly  subjected  the  association  to 
a  penalty  of  $25  per  day  for  each  day  the  report  was  with- 
held. The  Auditor  was  required  to  report  the  condition  of 
the  associations  biennially.  This  report  was  to  contain  a 
summarized  statement  of  the  condition  of  the  association, 
together  with  such  suggestions  as  he  might  deem  expedi- 
ent.^'^* In  accordance  with  the  statute  the  Auditor  pub- 
lished in  1897  the  first  regular  report  of  building  and  loan 
associations. ^'^^  In  1900  the  law  was  amended  to  require  a 
detailed  statement  in  the  report  of  the  names  of  officers  and 
salaries  paid.^^^  The  regulations  then  laid  down  hold  sub- 
stantially at  the  present  time.  In  1917  the  State  Depart- 
ment of  Banking  was  created,  but  the  building  and  loan  asso- 
ciations have  remained  under  the  Auditor's  supervision. 

Of  the  value  of  regular  public  reports  there  can  be  no 
doubt.  These  enable  members  to  keep  in  touch  with  the 
progress  of  the  business,  since  they  are  usually  printed  for 
distribution  to  the  members  and  to  others  interested.  For 
this  reason  they  serve  also  for  advertising  purposes.  The 
reports  are  even  more  important  as  a  stimulus  to  the  officers 
to  make  a  good  showing  and  as  a  check  on  corruption.  To 
guard  further  against  corruption  all  officers  who  handle  any 
funds  have  been  required  since  1896  to  give  bond  or  fidelity 
insurance:  these  bonds  must  be  approved  by  the  board  of 
directors  and  the  State  Auditor.^'^'^ 

Within  sixty  days  after  the  legislation  of  1896  was  en- 
acted all  associations  were  required  by  the  law  to  conform 
thereto.  The  only  exception  was  in  case  an  association 
signified  its  intention  to  close  up  its  affairs,  in  which  case 
it  was  given  additional  time  to  do  so  without  being  subject 
to  penalties.     Domestic  or  domestic-local  associations  were 


BUILDING  AND  LOAN  ASSOCIATIONS  259 

required  to  reincorporate  or  amend  their  articles  to  comply, 
while  foreign  associations  were  to  furnish  a  copy  of  their 
articles  and  the  required  securities.  Doing  business  with- 
out a  certificate  or  soliciting  business  for  an  association 
without  having  a  certificate  was  made  a  criminal  act  subject 
to  a  fine  of  not  over  $10,000  or  imprisonment  for  not  over 
ten  years  or  both.^^^ 

In  1902  unincorporated  associations  were  defined  and 
regulated.  Any  organization  or  individuals  engaged  in 
creating  funds  on  periodic  payments  by  members  to  loan  on 
real  estate,  personal  property,  or  for  similar  purposes 
was  deemed  a  building  and  loan  association  and  subject  to 
the  provisions  of  the  law  governing  them  so  far  as  it.  was 
applicable.  Before  beginning  business  they  must  submit 
to  the  Executive  Council  a  full  and  complete  sworn  state- 
ment of  resources  and  liabilities,  together  with  the  proposed 
plan  of  business.  Fifty  thousand  dollars  worth  of  secur- 
ities must  be  deposited  with  the  Auditor  as  a  guaranty 
fund.  Acceptable  securities  should  consist  of  first  mort- 
gages and  negotiable  notes  bearing  interest  of  not  less  than 
five  per  cent,  said  mortgages  to  be  secured  by  real  estate 
worth  double  the  amount  of  the  mortgages.  The  Auditor 
might  require  additional  securities  if  necessary  for  the  pro- 
tection of  investors. 

The  Executive  Council  must  approve  the  plan  and  method 
of  business  and  the  Auditor  issue  a  certificate  to  permit 
the  association  to  transact  business  in  the  State.  Officers 
must  give  approved  bonds.  Reports  similar  to  those  called 
for  from  incorporated  companies  must  be  made  annually. 
In  addition  the  Auditor  may  call  for  reports,  of  any  desig- 
nated past  date,  as  often  as  four  times  a  year.  Examina- 
tions might  also  be  made  at  his  discretion,  the  costs  of  $10 
per  day  for  the  time  spent  and  necessary  expenses  being 
borne  by  the  building  and  loan  association.  Heavy  penal- 
ties were  prescribed  for  any  false  statements,  unauthorized 


260  HISTORY   OF   BANKING   IN   IOWA 

solicitation  of  funds,  or  other  fraudulent  or  improper  trans- 
action."^'-^ 

The  occasion  of  this  law  appears  to  have  been  the  estab- 
lishment within  the  State  of  a  class  of  unincorporated  asso- 
ciations or  partnerships  transacting  their  business  under 
what  were  termed ' '  Diamond  Contracts ' '.  In  some  of  these 
companies  the  member  was  promised  a  diamond  on  the 
maturity  of  the  contract,  in  other  cases  he  was  to  receive 
a  home.  The  operations  of  the  companies  were  of  such  a 
doubtful  nature  that  the  Auditor  in  his  biennial  report  for 
1901  asked  the  General  Assembly  either  to  prohibit  them 
from  doing  business  or  to  provide  for  their  supervision  and 
control.^*" 

Two  years  later  the  Auditor  again  called  upon  the  legis- 
lature to  regulate  investment  companies  carrying  on  a  busi- 
ness somewhat  similar  to  that  of  building  and  loan  associa- 
tions. These  companies  were  engaged  in  the  business  of 
issuing  investment  securities  on  the  installment  plan,  but 
varied  their  contracts  so  as  to  evade  coming  under  the 
building  and  loan  or  insurance  laws.  Some  of  these  com- 
panies had  represented,  through  their  agents,  that  they  had 
deposited  securities  with  the  Auditor 's  department  to  guar- 
antee their  contracts.  The  evidence  produced  during  the 
prosecution  of  one  company  for  failure  to  comply  with  the 
law,  passed  by  the  General  Assembly  as  the  Auditor  had 
requested,  indicated  the  necessity  for  supervision.  The 
General  Assembly  placed  all  such  associations  under  the 
supervision  of  the  Auditor  and  required  them  to  report  to 
him  annually.  Reports  were  not  required  to  be  published, 
so  no  further  record  is  found  of  them — if  indeed  any  ob- 
tained certificates  under  the  law.^^^ 

BENEFITS  FEOM  BUILDING  AND  LOAN  ASSOCIATIONS 

The  direct  benefits  of  the  building  and  loan  associations 
to  members  may  be  said  to  be  threefold :  first,  they  stimulate 


BUILDING  AND  LOAN  ASSOCIATIONS  261 

home  owning;  second,  they  inculcate  habits  of  thrift;  and 
third,  they  train  in  business  methods  and  general  knowledge 
of  affairs. 

Arguments  for  the  advantages  of  home  owning  need 
scarcely  be  urged.  The  home  owner  is  almost  always  a 
steadier  workman  and  more  conservative  citizen.  One  of 
the  difficult  problems  confronting  the  employer  of  labor  in 
America  is  the  labor  turn-over.  At  the  Ford  plant  in  De- 
troit one  of  the  most  effective  means  of  checking  this  waste 
was  found  to  be  a  stimulation  of  home  owning.  Bolshevism 
and  other  radical  movements  receive  support  from  the 
propertyless  individual.  The  building  and  loan  association 
provides  the  means  for  the  working  man  to  save  for  a  home ; 
it  permits  him  to  borrow  on  a  basis  which  encourages  pay- 
ment of  the  debt.  At  the  time  of  the  comprehensive  investi- 
gation of  1893,  seventy  per  cent  of  the  shareholders  were 
classed  as  working  people.  In  a  survey  of  the  benefits  of 
building  and  loan  associations  the  Bureau  of  Labor  con- 
tributes testimony  which  is  the  product  of  first  hand  infor- 
mation. ''In  the  testimony  before  the  Industrial  Commis- 
sion it  was  very  strongly  impressed  upon  the  Commission 
that  the  influence  of  these  institutions  upon  industrial  life 
was  conservative,  tending  toward  the  prevention  of  dis- 
putes and  strikes  and  making  for  industrial  peace.  The 
home  owner  acquires  a  real  and  tangible  interest  in  the 
community  and  its  welfare  as  well  as  an  increased  self- 
respect  and  more  elevated  moral  standard.  "^^^ 

The  second  advantage,  that  of  inculcating  habits  of  thrift 
and  saving,  also  needs  little  explanation  or  support.  Build- 
ing and  loan  associations  furnish  a  place  for  safe  and  profit- 
able investment  for  small  sums.  The  plan  of  periodic  pay- 
ment on  shares  gives  a  further  stimulus  toward  regularity 
of  deposit.  All  deposits  are  available  in  case  of  need,  but 
the  handicaps  on  withdrawing  make  it  unlikely  that  money 
once  saved  will  be  spent  for  any  trivial  purpose.    When  the 


262  HISTORY    OF    BANKING    IN    IOWA 

shareholder  is  a  borrower  the  advantage  of  the  installment 
method  of  attacking  a  debt  is  obvious ;  it  has  been  likened 
to  attacking  an  army  in  detail — one  installment  after  an- 
other is  conquered  until  the  whole  debt  is  annihilated.  Thus 
is  saving  stimulated  and  real  property  created. 

Business  training  and  knowledge  of  affairs  gained 
through  connection  with  the  association  is  a  third  benefit  to 
the  individual.  This  comes  from  the  fact  that  all  depositors 
are  shareholders  and  participate  in  the  management  of  the 
association — a  cooperative  feature  that  is  undoubtedly  of 
value  in  adding  to  the  feeling  of  self-respect  and  importance 
of  the  members. 

The  place  of  the  building  and  loan  associations  in  the 
community  and  their  relation  to  other  financial  institutions 
have  come  to  be  quite  clearly  recognized.  It  is  obvious  that 
they  are  not  in  any  sense  rivals  of  the  commercial  banks. 
Banking,  as  such,  is  strictly  prohibited  to  such  associations 
by  the  laws  of  Iowa.  The  language  of  the  statute  is  ex- 
plicit: ''It  shall  be  unlawful  for  any  building  and  loan  or 
savings  and  loan  association  to  receive  deposits  of  money 
without  issuing  shares  of  stock  for  the  same,  or  to  transact  a 
banking  business. '  '^^^  The  practice  of  practically  all  build- 
ing and  loan  associations  is  to  deposit  all  their  funds  in  some 
bank  and  keep  no  treasure  vault  of  their  own.  They  aid  in 
creating  permanent  wealth  in  the  community  by  gathering 
together  small  savings,  a  large  percentage  of  which  would 
not  find  their  way  into  any  bank.  The  working  man  is  made 
a  better  and  more  thrifty  citizen ;  labor  and  merchandising 
in  the  community  is  stimulated.  In  the  cities  where  the 
associations  are  well  conducted,  bankers  are  nearly  unani- 
mous in  their  approval.  In  fact  many  officers  and  directors 
of  building  and  loan  associations  are  bank  officers  and  direc- 
tors. Wise  bankers  encourage  the  association,  recognizing 
that  it  occupies  a  special  field  and  is  not  detrimental  to  their 
business.^^* 


BUILDING  AND  LOAN  ASSOCIATIONS  263 

LEAGUE  ORGANIZATIONS 

As  the  building  and  loan  movement  developed  in  this 
country  it  was  recognized  that  there  was  a  need  for  some 
unification  of  the  movement  to  enable  officers  of  associations 
to  exchange  views  and  work  in  a  spirit  of  harmony  to  pro- 
mote the  general  interests.  This  led  to  the  formation  of 
so-called  leagues,  the  purpose  which  has  been  well  stated  in 
these  words:  ''The  necessity  for  greater  uniformity  of 
methods,  the  constant  vigilance  required  to  prevent  inimical 
legislation,  and  the  concerted  action  necessary  to  secure 
progressive  enactments  favorable  to  the  development  of 
these  associations,  led  to  the  formation  of  so-called 
leagues.  "^^^ 

The  league  organizations  were  first  perfected  in  the  vari- 
ous States.  These  were  followed  by  the  United  States 
League  of  Local  Building  and  Loan  Associations,  the  origin 
of  which  is  traceable  to  a  resolution  at  the  State  convention 
in  Ohio  in  1892.  The  first  meeting  was  held  in  Chicago  in 
July,  1893,  at  the  time  of  the  World's  Fair.  Since  that  time 
it  has  held  regular  annual  meetings  in  various  cities  of  the 
United  States.^^^ 

In  Iowa  the  Building  and  Loan  League  has  been  in  exist- 
ence about  the  same  length  of  time.  It  held  its  twenty- 
seventh  meeting  at  Waterloo  on  September  25,  1918.  Iowa 
associations  do  not  support  the  State  league  as  it  would 
seem  to  deserve.  The  list  of  delegates  usually  in  attend- 
ance shows  that  only  about  one-fourth  to  one-third  of  the 
associations  of  the  State  are  actually  represented.  The 
larger  associations,  however,  are  included,  so  that  at  the 
Waterloo  meeting  four-fifths  of  the  assets  of  the  State  asso- 
ciations were  represented.^^'^ 

A  recognized  need  of  the  Iowa  building  and  loan  move- 
ment is  for  greater  publicity.  The  general  public  is  not 
familiar  with  association  methods.  This  need  for  public 
education  has  been  recognized  by  the  associations  and  dis- 


264  HISTORY   OF   BANKING   IN   IOWA 

cussed  at  league  meetings.  In  the  discussion  at  the  1917 
convention,  advertising  plans  in  use  elsewhere  were  out- 
lined. A  successful  method  was  shown  to  be  combined  ad- 
vertising, as  in  Toledo,  Ohio,  where  ten  or  twelve  associa- 
tions united  to  carry  on  a  successful  campaign  of  education. 
Some  associations  have  distributed  copies  of  the  American 
Building  Association  News  over  the  counter  or  to  legislators 
when  favorable  legislation  was  needed.  As  a  result  of  the 
discussion  the  Iowa  League  voted  to  ask  W.  E.  Boyd  of 
Cedar  Rapids  to  write  some  articles  on  thrift,  and  appointed 
a  publicity  committee  to  report  at  the  next  meeting.^^^ 

PEOPOSED  FEDERAL  CO-OPERATIVE  BANK 

In  connection  with  the  af  ter-the-war  campaign  to  promote 
home  building  there  was  launched  a  movement  for  a  na- 
tional system  of  home  loan  banks,  through  which  building 
and  loan  associations  might  rediscount  their  securities  and 
make  available  more  funds  for  further  loans.  The  purpose 
of  the  proposed  system  is  to  do  for  the  building  and  loan 
associations  what  the  Federal  reserve  system  has  done  for 
the  commercial  banks  and  what  the  Federal  land  banks  have 
done  for  the  national  farm  loan  associations.  Such  a  sys- 
tem would  be  headed  by  a  Federal  home  bureau  in  the 
Treasury  Department.  The  general  functions  of  the  pro- 
posed banks  and  their  methods  of  selling  bonds  to  investors 
would  resemble  very  closely  those  now  followed  by  the  Fed- 
eral land  banks.  The  Department  of  Labor  and  the  United 
States  League  of  Local  Building  and  Loan  Associations 
strongly  backed  the  proposal  which  was  embodied  in  a  bill 
at  the  first  session  of  the  Sixty-sixth  Congress. ^^^ 

TAXATION  OF  BUILDING  AND  LOAN  ASSOCIATIONS 

The  first  provision  for  taxing  the  shares  of  building  and 
loan  associations  was  made  in  1876,  when  the  shares  were  to 
be  assessed  at  their  cash  value.     ''Unredeemed"  shares 


BUILDING  AND  LOAN  ASSOCIATIONS  265 

only  were  to  be  taxed  and  these  were  to  be  listed  to  the  in- 
dividual owners  thereof.  In  1896  the  law  stated  that  the 
shares  of  stock  should  be  classified  as  moneys  and  credits 
for  purposes  of  taxation.^^"  In  1913  previous  provisions 
were  repealed  and  a  substitute  section  enacted.  The  gen- 
eral method  of  taxing  shares  remained  unchanged.  They 
were  to  be  assessed  and  taxed  to  the  individual  holders  at 
their  places  of  residence.  In  1911  the  General  Assembly  had 
provided  for  the  taxation  of  moneys  and  credits  at  a  flat 
rate  of  five  mills  on  the  dollar,  which  became  the  rate  for 
the  loan  association  shares  according  to  their  cash  value. 
The  real  estate  and  the  reserve  fund  of  the  association  must 
be  assessed  as  real  estate  or  personal  property  and  be  sub- 
ject to  taxation  at  the  principal  place  of  business.  The 
State  Auditor  furnishes,  through  the  county  auditor,  to  each 
assessor  a  statement  of  the  names  and  post  office  addresses 
of  all  stockholders  in  foreign  associations  residing  in  the 
assessor's  district,  together  with  the  actual  value  of  the 
shares  so  held.  In  1911  the  general  incorporation  law  was 
amended  to  make  building  and  loan  associations  exempt 
from  the  payment  of  the  incorporation  filing  fee  provided 
therein  in  excess  of  $25.  They  were  also  made  exempt  from 
the  payment  of  a  renewal  fee.^^^ 

The  Federal  government  has  also  been  liberal  in  granting 
exemption  from  taxation  to  building  and  loan  associations. 
They  were  made  exempt  from  the  early  income  tax  law, 
which  was  later  held  unconstitutional,  from  the  stamp  act 
of  the  Spanish- American  War  in  1898,  and  from  the  cor- 
poration income  tax  and  the  war  excess  profits  tax.  They 
were,  however,  made  subject  to  the  stamp  taxes  upon  bonds, 
notes,  conveyances,  and  other  documents.^^^ 

Building  and  loan  associations  have  now  had  a  history  of 
about  half  a  century  of  operation  in  Iowa.  During  the  first 
half  of  this  time  they  grew  in  numbers  and  strength  prac- 
tically unregulated  and  subject  to  the  abuses  incident  to  this 


266  HISTORY   OF    BANKING   IN   IOWA 

lack  of  supervision.  During  the  first  few  years  of  State 
supervision,  beginning  in  1896,  the  decline  in  number  of  as- 
sociations and  total  assets  was  so  marked  as  to  cause  the 
Auditor  to  raise  the  question  as  to  the  desirability  of  con- 
tinuing the  plan  of  publication  of  reports.  He  favored  some 
plan  of  local  publicity,  evidently  feeling  that  the  future  im- 
portance of  building  and  loan  associations  would  be  very 
limited.^^^  The  addition  of  new  associations  during  the 
past  decade  and  the  growing  prosperity  of  those  now  in 
existence  proves  that  any  fear  that  all  associations  will  quit 
the  field  is  unwarranted.  The  elimination  of  associations 
pursuing  unsound  methods  has  broken  down  prejudice — 
even  in  Des  Moines,  the  headquarters  of  the  old  associations. 
The  popular  belief  that  the  Iowa  law  is  unfavorable  to  build- 
ing and  loan  associations  of  the  proper  type  is  being  dis- 
pelled wherever  parties  interested  in  starting  associations 
investigate  the  facts.  In  view  of  the  existing  situation  in 
Iowa  and  the  growing  importance  of  building  and  loan  asso- 
ciations in  other  Commonwealths,  the  outlook  for  the  build- 
ing and  loan  movement  in  this  State  seems  very  bright. 


XII 

FARM  MORTGAGE  BANKING 

The  chief  business  of  the  Iowa  bankers  during  the  period 
of  the  fifties  was  loaning  to  the  pioneers  on  land  security. 
But  the  panic  of  1857  forcibly  illustrated  the  danger  of 
using  a  bank's  credit  to  assist  in  land  speculation  and  drove 
home  the  truth  of  the  principle  that  commercial  banks  should 
loan  as  largely  as  possible  on  short  time  self-liquidating 
obligations.  The  founders  of  the  State  Bank  of  Iowa,  and 
also  of  the  national  banking  system,  prohibited  the  banks 
established  thereunder  from  accepting  real  estate  security. 
A  long  step  was  thus  taken  toward  establishing  distinctly 
commercial  banking.  But  the  private  banker  continued  in 
the  field.  He  adapted  his  business  to  the  needs  of  the  com- 
munity. In  some  cases  he  carried  on  a  commercial  banking 
business,  in  others  he  maintained  a  mortgage  and  loan 
agency.  The  savings  bank  law  also  permitted  the  banks 
established  thereunder  to  invest  in  real  estate  mortgages. 
State  chartered  and  private  banks  have  therefore  continued 
to  serve  as  agencies  for  furnishing  long-time  loans  to  farm- 
ers. 

Specialization,  which  has  marked  banking  and  commerce 
as  a  whole,  has  tended,  however,  toward  the  creation  of  in- 
vestment banks  to  deal  in  farm  mortgages.  By  1914  this 
type  of  institution  was  so  well  differentiated  that  national 
and  State  associations  of  farm  mortgage  bankers  were 
formed.  In  1916  Congress  passed  an  act  establishing  the 
Federal  farm  loan  system,  under  the  provisions  of  which 
various  types  of  institutions  have  come  into  being,  devoted 
exclusively  to  the  farm  mortgage  business.  Within  the  past 
decade,  therefore,  farm  mortgage  banking  has  become  "a 
distinct,  well-recognized  profession.  "^^^ 

267 


268 


HISTORY    OF    BANKING    IN    IOWA 


VALUE  OF  FAEM  LAND  IN  IOWA 

The  vast  amount  of  wealth  represented  by  farm  property, 
the  large  per  acre  value  of  the  land,  and  the  rapid  improve- 
ment of  the  farms  of  the  State  have  made  the  volume  of 
mortgage  business  in  Iowa  very  large.  Moreover,  the  high 
quality  of  this  mortgage  security  has  attracted  much  out- 
side capital  which  has  contributed  to  the  State's  rural  de- 
velopment. Unfortunately,  much  of  the  statistical  data  per- 
taining to  the  Iowa  mortgage  business  are  unsatisfactory. 
However,  as  an  introduction  to  the  discussion  of  mortgage 
banking  in  this  chapter  the  available  facts  will  be  presented 
to  show  the  basis  for  the  business  of  these  institutions. 

Federal  and  State  census  statistics  show  that  the  value 
of  farm  property  in  Iowa  has  increased  steadily  since  1850 
when  the  first  data  were  collected. 

Table  X 


Value  of  Farm  Property  in  Iowa'*®^ 

Yeab 

Land  and  Buildings 

Avebaqe  "Value 
PER  Farm 

AVEBAGE  VALUE 

PER  Acre 

1920 

$7,601,772,290 

S35,616 

$227.09 

1915 

3,992,100,158 

19,924 

121.00 

1910 

3,257,379,400 

15,008 

96.00 

1900 

1,497,554,790 

6,550 

43.31 

1890 

857,581.022 

4,247 

28.13 

1880 

567,430,227 

3,061 

22.92 

1870 

314,129,953 

2,701 

20.21 

1860 

119,899,547 

1,960 

11.91 

1850 

16,657,667 

1,125 

6.09 

Table  X  shows  that  from  a  value  of  about  sixteen  and  two- 
thirds  millions  in  1850,  the  farms  and  buildings  in  Iowa  had 
risen  in  1910  to  over  three  and  a  quarter  billions.  In  1915 
the  Iowa  State  census  placed  the  total  value  of  all  farm 
property,  land  and  improvements,  at  nearly  four  billions. 
In  the  next  five  years  farm  property  practically  doubled  in 


FARM  MORTGAGE  BANKING  269 

value.  Statistics  published  annually  by  the  Department  of 
Agriculture  indicate  that  the  average  per  acre  value  of  all 
plow  lands  in  1916  was  $153,  in  1917  $156,  in  1918  $174,  and 
in  1919  $192.  This  placed  Iowa  at  the  head  of  the  list  of  the 
corn-belt  States  based  on  land  value  per  acre,  being  $28 
per  acre  above  Illinois,  the  next  State  in  order.^^^  These 
figures  were  published  in  March  of  each  year  and  thus  rep- 
resent the  value  at  the  beginning  rather  than  the  close  of  the 
year.  They  are  not  exactly  comparable  with  census  figures, 
but  are  the  most  satisfactory  data  available  for  showing 
the  recent  increase  in  value. 

In  1919  a  phenomenal  boom  in  the  selling  price  of  Iowa 
land  took  place,  stimulated  primarily  by  the  large  profits 
obtained  from  farm  products  sold  at  war  prices.  Examples 
of  farms  being  resold  within  ninety  days  at  a  cash  advance 
of  from  $50  to  $100  per  acre  were  not  uncommon  during  the 
early  summer  months  of  1919.  On  August  21,  1919,  0.  G. 
Lloyd  of  the  farm  management  department  of  the  Iowa 
State  College  of  Agriculture  at  Ames  reported  that  in  fifty 
of  the  ninety-nine  counties  farms  had  sold  for  more  than 
$300  per  acre  during  the  preceding  six  months.  The  Fed- 
eral Bureau  of  Crop  Estimates  credited  Iowa  with  an  aver- 
age increase  of  $63  per  acre  during  1919.  This  brought  the 
average  up  to  $255  per  acre.  An  intensive  survey  of  farm 
land  values  in  Iowa  was  made  by  the  Office  of  Farm  Manage- 
ment of  the  United  States  Department  of  Agriculture  in 
cooperation  with  the  Iowa  Agricultural  Experiment  Sta- 
tion. The  average  price  per  acre  for  the  1414  sales  upon 
which  data  were  obtained  was  $248,  but  this  covered  sales 
between  January  and  September,  1919,  whereas  during  the 
latter  months  of  the  period  the  figures  as  shown  were  con- 
siderably higher.  Moreover,  the  investigators  expressed 
the  opinion  that  the  better  farms  were  sold  during  the  early 
weeks  of  the  ''boom",  before  the  prices  had  reached  the 
new  high  level.    For  this  reason  even  the  later  sales  would 


270  HISTORY    OF    BANKING    IN    IOWA 

not  reflect  the  full  extent  of  the  advance.  Further  informa- 
tion secured  by  the  officers  of  the  Iowa  Farm  Mortgage 
Association  supports  these  estimates.  Data  were  secured 
early  in  1920  by  a  questionnaire  to  all  members  of  the  Asso- 
ciation, bankers  throughout  the  State,  and  others  in  a  posi- 
tion to  give  information  concerning  land  sales.  From  167 
replies  received  the  average  value  per  acre  was  found  to  be 
$291.75,  with  an  average  per  acre  increase  of  $80  in  twelve 
months."^ 

In  total  value  of  all  property  Iowa  ranked  sixth  among 
the  States  in  1912 ;  in  per  capita  wealth  the  State  was  second 
only  to  sparsely  settled  Nevada.^^^  Of  the  total  wealth  of 
$7,868,454,211  over  $5,000,000,000  was  in  real  property,  and 
about  three-fourths  of  this  consisted  of  farm  land  and  build- 
ings. In  addition  to  the  real  estate  shown  in  Table  X  the 
farmers  possessed  working  capital  in  the  form  of  machin- 
ery, stock,  feeds,  and  seed.  Farming  in  Iowa,  therefore, 
was  a  productive  business  representing,  in  1920,  about 
$8,500,000,000  of  capital.^««  It  over-shadowed  all  the  other 
industries  of  the  State  combined.  Quite  naturally  credit 
in  the  form  of  long-time  loans  is  needed  to  finance  this  large 
volume  of  business. 

STATISTICS  OF  IOWA  FARM  MORTGAGES 

There  are  no  complete  and  accurate  data  on  the  volume  of 
mortgage  loans  in  Iowa,  although  such  statistics,  if  avail- 
able, would  be  of  unusual  interest  in  this  agricultural  State. 
Since  the  State  does  not  compile  such  information,  the 
statistics  of  the  Federal  census  bureau  and  of  life  insurance 
companies  are  about  the  only  material  published.  Data 
relating  to  mortgage  debt  were  first  collected  in  the  regular 
decennial  census  in  1890.  The  basis  of  the  returns  in  the 
three  census  reports  has  been  the  ''farm  home"  occupied 
by  its  owner.  No  reports  have  been  secured  for  farms 
operated  by  tenants  and  managers.     Data  regarding  the 


FARM  MORTGAGE  BANKING 


271 


amount  of  mortgage  debt  were  obtained  in  1890,  1910,  and 
1920  but  not  in  1900.  The  data  are  consequently  incom- 
plete, but  since  they  were  collected  on  practically  the  same 
basis  for  the  three  reports  they  are  quite  accurate  for  com- 
parative purposes  and  are  of  considerable  general  value. 

Table  XI 


Farm  Mortgage  and  Debt  Reports  for  Iowa""" 

1920 

1910 

1890 

Total  number  of  farms  opera- 

ted BY  owners 

121,888 

133,003 

144,698 

Number    free    from     mortgage 

DEBT 

45,807 

63,234 

67,587 

Number  with  mortgage  debt 

66,096 

68,045 

77,111 

Number   with   no  mortgage   re- 

port 

9,985 

1,724 

Per  cent  of  mortgaged  farms 

69.1 

51.8 

53.3 

Number     reporting     debt     and 

amount 

52,341 

50,452 

77,111 

Value  of  their  lands  and  build- 

ings 

$1,814,260,136 

$735,265,320 

$305 

658,669 

Amount  of  mortgage  debt 

$489,816,739 

$204,242,722 

$101 

745,929 

Per  cent  of  value  of  land  and 

buildings 

27.0 

27.8 

33  3 

Average  indebtedness  per  farm 

$9,358 

$4,048 

$1,319 

In  1920  there  were  213,439  farms  in  Iowa,  but  mortgage 
data  were  secured  only  on  the  121,888  owned  in  whole  or  in 
part  by  the  operators.  Of  this  number  45,807  were  reported 
as  free  from  mortgage ;  66,096,  that  is,  about  fifty-nine  per 
cent,  were  reported  as  mortgaged;  and  for  9985  no  report 
concerning  mortgage  indebtedness  was  obtained.  The 
amount  of  mortgage  debt  was  $489,816,739  for  the  farms 
included,  or  an  average  indebtedness  of  $9358  per  farm, 
equivalent  to  twenty-seven  per  cent  of  the  value  of  the  land 
and  buildings  mortgaged.  The  aggregate  amount  of  mort- 
gage indebtedness  and  the  average  debt  per  farm  more  than 
doubled  in  the  decade  ending  in  1920,  but  the  percentage  of 
debt  to  value  was  almost  the  same  as  in  1910. 


272 


HISTORY   OF    BANKING   IN   IOWA 


In  1890  the  total  mortgage  debt  was  $101,745,924,  or  an 
average  of  $1319  per  farm,  equivalent  to  thirty-three  and 
three-tenths  per  cent  of  the  value.  The  figures  for  1890  in- 
clude all  owned  farm  homes,  estimates  being  made  of  value 
of  farms  and  amount  of  debt  for  all  defective  reports.  It 
will  be  noted  that,  although  the  average  size  of  the  mort- 
gage was  over  seven  times  as  great  in  1920  as  it  had  been 
thirty  years  earlier,  yet  as  a  result  of  the  great  increase  in 
land  value  the  percentage  of  debt  to  value  decreased  from 
thirty-three  and  three-tenths  per  cent  to  twenty-seven  per 
cent. 

The  data  on  mortgages  cover  only  the  owned  farm  homes, 
leaving  over  one-third  of  the  land  about  which  no  informa- 
tion was  secured.  The  amount  of  tenancy  in  1900  and  1910 
is  shown  by  Table  XII. 

Table  XII  shows  that  forty-four  per  cent  of  all  the  land  in 
farms  in  1920  was  operated  by  tenants.  The  amount  of 
mortgage  indebtedness  against  these  farms  is  unknown, 
but  it  was  surely  considerable,  although  probably  not  as 
great  proportionally  as  for  the  farms  operated  by  owners. 

Table  XII 


Farm  Operation  and  Ownership  in  Iowa***^ 

Number 

OF 

Farms 

Per  Cent 
OF  Total 
Number 
OF  Farms 

Total  Num- 
ber OF 

Acres 

Per  Cent 
OF  All 
Land  in 
Farms 

Operated  by  Owners 

1920 
1910 
1900 

121,888 
133,003 
147,305 

57.1 
61.3 
64.4 

18,051,121 
20,214,337 
22,451,768 

53.9 
59.6 
64.9 

Operated  by  Manag- 
ers 

1920 
1910 
1900 

2,487 
1,926 
1,581 

1.2 
0.9 
0.7 

569,086 
490,805 
498,982 

1.7 
1.4 
1.4 

Operated  by  Tenants 

1920 
1910 
1900 

89,064 
82,115 
79,736 

41.7 
37.8 
34.9 

14,854,689 
13,225,546 
11,623,587 

44.4 
39.0 
33.6 

FARM  MORTGAGE  BANKING  273 

many  of  whom  were  in  the  early  stages  of  paying  for  the 
land.  Increasing  tenancy  is  an  outcome  of  higher  priced 
land.  With  the  rapidly  mounting  price  of  land  this  becomes 
a  serious  economic  and  social  problem.  To  check  such  a 
tendency  is  an  important  function  of  improved  mortgage 
credit. 

Supplementary  statistics  on  Iowa  farm  mortgages  can 
be  obtained  from  the  reports  of  the  life  insurance  com- 
panies, the  largest  investors  in  farm  mortgages.  The  secre- 
tary of  the  association  of  life  insurance  presidents,  an  or- 
ganization representing  about  ninety-seven  per  cent  of  all 
investors  in  farm  mortgages  among  the  insurance  companies 
in  the  United  States,  recently  published  a  report  on  farm 
loan  investments  in  war  time.  On  December  31,  1914,  the 
farm  loans  in  Iowa  by  insurance  companies  were  $139,- 
511,101 ;  two  years  later  the  total  was  $195,782,521.  During 
the  first  nine  months  of  1917  new  loans  of  $61,152,392  were 
placed  by  the  insurance  companies.®*^ ^  The  latter  figure 
does  not  take  account  of  mortgages  paid  off  or  reduced 
during  the  same  period.  Insurance  companies  held  approx- 
imately $250,000,000  of  Iowa  mortgages  at  the  close  of  1917. 
The  volume  of  mortgages  held  by  banks,  endowed  institu- 
tions, mortgage  companies,  and  private  investors  can  only 
be  estimated.  Well-informed  farm  mortgage  dealers  esti- 
mated the  amount  of  mortgages  outstanding  in  the  summer 
of  1919  at  approximately  $500,000,000.  This  would  appear 
now  to  be  too  low  since  the  census  figure  for  owned  farms 
alone  was  $489,816,739  and  moreover  the  amount  of  debt 
was  secured  on  only  52,341  out  of  66,096  reported  as  mort- 
gaged. A  conservative  banker  after  careful  analysis  esti- 
mated that  $250,000,000  of  standard  first  mortgages  were 
placed  in  Iowa  during  the  first  three  months  of  1920.®°^ 
This  probably  does  not  represent  an  increase  of  that 
amount  in  outstanding  mortgages  since  renewals  appear 
to  have  been  included.     But  estimates  by  well-informed 

18 


274  HISTORY    OF    BANKING    IN    IOWA 

mortgage  dealers  in  June,  1921,  placed  the  total  of  all  Iowa 
farm  mortgages  at  from  $800,000,000  to  $1,000,000,000. 

Farm  mortgages  have  generally  proved  the  foundation 
of  prosperity  for  Iowa  farmers.  The  farmer  has  needed 
capital  to  develop  and  improve  his  farm;  for  this  purpose 
his  land  has  offered  the  best  security.  The  tenant  has 
wished  to  become  an  owner,  and  the  vendor  in  many  cases 
has  stood  ready  to  accept  a  considerable  part  of  the  pur- 
chase price  in  the  form  of  a  first  mortgage  on  the  farm. 
In  a  few  years  the  advancing  price  of  land  has  greatly  in- 
creased the  new  owner 's  equity  in  the  place  and  has  enabled 
him  to  tide  over  any  temporary  depression.  The  average 
value  of  the  mortgaged  farms  has  been  found  to  be  greater 
than  the  unmortgaged :  the  buildings  and  improvements  are 
also  of  higher  value.^*'^  The  average  size  of  the  Iowa  farm 
in  1910  was  156.3  acres — twenty-three  acres  larger  than  the 
average  farm  of  1880.*'*^'^  With  the  average  price  ranging 
from  $250  to  $300  per  acre  since  1919,  it  can  easily  be  seen 
that  in  the  neighborhood  of  $50,000  is  needed  to  buy  an  Iowa 
farm.  Many  persons  who  are  now  farming  either  bought 
the  land  at  a  fraction  of  its  present  market  value,  or  they 
have  inherited  from  parents  who  did  so.  The  buyer  at 
present  prices  needs,  and  will  long  continue  to  need,  credit 
on  a  long  term  basis.  Instead  of  a  thing  to  be  dreaded,  as 
is  the  mortgage  of  fiction,  the  farm  mortgage  is  the  cheapest 
means  the  Iowa  farmer  has  of  securing  capital  for  produc- 
tive purposes.  The  business  of  mortgage  banking  in  some 
form  seems  sure  to  be  a  relatively  permanent  one. 

EARLY  MORTGAGE  BANKING 

The  material  for  the  complete  history  of  mortgage  bank- 
ing in  Iowa  has  not  been  assembled — if,  indeed,  it  ever  can 
be.  No  State  supervision  has  been  exercised  over  this  busi- 
ness as  such.  No  reports  of  mortgage  dealers  are  filed 
with  State  officials.     During  a  large  part  of  Iowa's  Terri- 


FARM  MORTGAGE  BANKING  275 

torial  and  State  history  there  was  no  specialization  in  the 
mortgage  business.  Prior  to  the  installation  of  the  Fed- 
eral farm  loan  system  the  various  classes  of  purchasers  of 
farm  mortgages  might,  for  convenience,  be  grouped  in  five 
main  classes :  banks  of  all  kinds,  farm  mortgage  companies, 
insurance  companies,  endowed  institutions,  and  private  in- 
vestors. In  placing  their  investments  these  various  classes 
used  different  methods  and  facilities. 

In  an  earlier  chapter  the  part  played  by  the  private 
banker  of  the  fifties  in  "entering  land  on  time",  acting  as 
agent  for  eastern  capitalists  in  placing  money  in  farm  loans, 
dealing  in  land  warrants,  exchanging  gold  for  the  eastern 
drafts  of  land  buyers,  and  carrying  on  a  general  real  estate 
agency  has  already  been  described.  Gradually  the  func- 
tions of  commercial  banking  were  developed  by  the  older 
banks.  But  the  pioneer  banker  had  followed  the  establish- 
ment of  the  government  land  office  at  Council  Bluffs,  Fort 
Dodge,  Sioux  City,  and  other  points.  The  banker  took 
heavy  risks  and  charged  proportionately. 

The  panic  of  1857  swept  away  the  majority  of  the  existing 
banks  in  Iowa.  Shortly  thereafter  the  State  Bank  of  Iowa 
was  incorporated  with  a  prohibition  in  its  charter  against 
real  estate  loans.  A  similar  restriction  was  contained  in 
the  national  banking  act  of  1863.  These  conspicuous  ex- 
amples of  successful  banking  without  the  use  of  real  estate 
security  show  that  even  in  the  early  period  banking  could 
be  carried  on  in  Iowa  with  its  loans  limited  to  the  discount- 
ing of  short  time  commercial  paper.  But  throughout  the 
existence  of  the  State  Bank,  during  the  dominance  of  the 
national  system  before  1875,  and  even  after  the  recognition 
of  State  and  savings  banks  under  Iowa  laws,  the  private 
banks  continued  to  thrive.  Their  business  was  what  they 
chose  to  make  it.  In  many  cases  they  were  small  commer- 
cial banks,  which  later  incorporated  under  State  or  national 
law  and  have  become  substantial  institutions.    Other  private 


276  HISTORY    OF    BANKING    IN    IOWA 

bankers  were  chiefly  interested  in  the  farm  mortgage  and 
real  estate  business,  accepting  deposits  only  incidentally 
and  discounting  very  little  short  time  paper.  As  a  result 
of  changing  public  sentiment  and  of  the  development  of 
specialization  in  banking,  the  large  place  among  the  financial 
institutions  of  the  State  formerly  taken  by  private  banks 
has  been  lost.  In  a  great  many  cases  they  have  sought  in- 
corporation under  State  or  national  law;  in  others  they 
have  developed  the  mortgage  and  loan  business  as  a  spe- 
cialty. 

FAEM  MOETGAGE  BUSINESS  OF  THE  COMMERCIAL  BANKS 

In  1863  the  framers  of  the  national  banking  law,  influ- 
enced by  the  general  abuse  of  the  right  of  making  real  estate 
loans,  prohibited  the  national  banks  to  be  created  there- 
under from  making  any  mortgage  loans.  In  order  to  meet 
the  legitimate  demand  for  this  class  of  loans,  many  national 
banks  established  an  associate  savings  bank  or  trust  com- 
pany. Usually  this  allied  institution  is  owned  by  the  same 
stockholders,  operates  in  the  same  banking  room,  and  is 
managed  by  the  same  officers.  Savings  deposits  have  been 
made  through  this  affiliated  institution,  which  has  been  free 
to  loan  on  real  estate,  limited  only  by  the  State  laws  govern- 
ing the  investment  of  savings  bank  funds.  Where  no  asso- 
ciate institution  has  existed  the  national  bank  has  often  in 
a  certain  sense  made  real  estate  loans.  This  has  been  accom- 
plished by  loaning  to  a  farmer  on  his  personal  note  although 
relying  on  the  fact  that  he  is  a  land  owner  to  secure  the  note. 
Notes  made  in  this  way  are  recognized  as  investment  loans 
and  are  renewed  from  time  to  time  by  the  banker. 

The  Federal  Reserve  Act  permits  national  banks  to  loan 
on  farm  land  an  aggregate  amount  not  exceeding  twenty- 
five  per  cent  of  its  capital  and  surplus,  or  one-third  of  its 
time  deposits.  The  time  limit  on  these  loans  is  fixed  at  five 
years  and  the  maximum  amount  at  fifty  per  cent  of  the 


FARM  MORTGAGE  BANKING  277 

actual  valne  of  the  property  offered  as  security.^"®  This 
has  extended  somewhat  the  opportunity  for  making  farm 
loans  by  this  class  of  banks,  but  the  nature  of  the  business 
of  many  national  banks  in  the  commercial  centers  and  the 
affiliation  of  others  with  savings  banks  or  trust  companies 
have  been  such  that  only  a  moderate  change  was  aifected  by 
this  amendment. 

State  and  savings  banks  have  always  been  allowed  to  in- 
vest in  real  estate  mortgages.  The  savings  bank  law  of 
1874  defined  the  class  of  investments  which  savings  banks 
might  make,  and  permitted  them  to  purchase  real  estate 
mortgages  upon  unincumbered  Iowa  land  worth  twice  the 
amount  loaned  thereon.  In  1913  an  amendment  was  passed 
which  permitted  savings  banks  to  invest  in  notes  or  bonds 
secured  by  real  estate  outside  of  Iowa,  if  in  any  county  ad- 
joining the  Iowa  State  line.  This  loaning  area  was  further 
extended  in  1917  to  any  adjoining  State,  except  that  no  loan 
may  be  made  on  real  estate  west  of  the  100th  meridian 
line.*'"'^  Until  very  recently,  therefore,  the  Iowa  banks  have 
been  limited  to  Iowa  mortgages.  The  amount  which  might 
be  loaned  to  any  one  individual  was  limited  to  twenty  per 
cent  of  the  capital  of  the  bank  prior  to  1902.  The  percent- 
age was  raised  in  that  year  to  fifty  per  cent  when  the  loan 
was  secured  by  mortgage  upon  unencumbered  farm  land.*^® 
Very  little  practical  limitation  has,  therefore,  existed  upon 
the  right  of  State  incorporated  banks  to  make  farm  mort- 
gage loans.  As  a  matter  of  fact  the  practice  in  this  respect 
has  differed  very  markedly  in  different  sections  of  the  State. 
In  the  older  counties  in  the  eastern  third  of  the  State,  it  is 
quite  common  for  a  bank  to  carry  a  considerable  amount  of 
real  estate  mortgages,  but  it  is  unusual  for  banks  in  certain 
western  counties  of  the  State  to  loan  any  of  their  funds  on 
real  estate,  except  temporarily.  The  explanation  of  this 
difference  lies  in  the  heavier  demand  for  short  time  loans 
in  the  western  counties.     These  short  loans  are  commonly 


278  HISTORY    OF    BANKING    IN    IOWA 

made  at  eight  per  cent  interest  and  are,  therefore,  much 
more  remunerative  than  the  mortgage  loans  which  seldom 
draw  over  six  per  cent.^''® 

In  addition  to  their  part  as  investors  in  farm  mortgages 
most  country  banks  have  served  as  agencies  for  placing  the 
money  of  other  institutions  or  individuals  wishing  to  make 
this  type  of  investment.  Practically  every  farmer  in  Iowa 
has  a  bank  to  which  he  turns  for  all  sorts  of  financial  aid 
or  advice.  The  farmer  planning  to  make  a  loan  looks  to 
''his  bank"  for  the  money.  These  banks  have  found  it 
profitable  to  place  loans  for  others  on  a  cash  commission 
basis. 

DEBENTUEE  COMPANIES 

In  the  period  from  1870  to  1893  many  debenture  com- 
panies were  formed  to  handle  the  investments  offered  by  the 
development  of  farm  land.  These  were  most  active  in  the 
Upper  Mississippi  Valley,  extending  into  Kansas,  Nebraska, 
and  the  Dakotas.  In  an  address  before  the  Iowa  Farm 
Mortgage  Association,  D.  H.  McKee,  Vice  President  of  the 
Iowa  Loan  and  Trust  Company,  Des  Moines,  stated  that  121 
debenture  companies  were  operating  in  this  territory  in 
the  early  nineties.  The  method  of  all  of  these  companies 
was  the  same.  Debentures  were  issued  which  were  a  first 
claim  on  the  general  assets  of  the  company  and  were  further 
secured  by  first  mortgages  on  improved  land  worth  twice 
the  amount  loaned  thereon.  Many  of  these  were  English 
or  Scotch  companies.  From  a  prospectus  in  his  possession 
of  the  Farm  Land  Mortgage  and  Debenture  Company  of 
Cedar  Rapids,  Mr.  McKee  presented  many  interesting  facts. 
This  document,  issued  in  1892  by  McFarlane,  Hutton,  and 
Patrick  of  Glasgow,  Scotland,  showed  that  the  company 
was  organized  in  1888,  and  apparently  was  financed  by 
Scotch  capital.  Its  paid-up  capital  was  20,618  pounds  of 
ordinary  and  87,744  pounds  of  preference  shares.     Deben- 


FARM  MORTGAGE  BANKING  279 

tures  of  710,200  pounds  were  outstanding,  making  total 
assets  of  over  $4,000,000.  The  Mortgage  and  Debenture 
Company,  Limited,  was  organized  in  England  to  carry  the 
business  of  the  Cedar  Rapids  Company,  and  the  Law  Guar- 
antee and  Trust  Society,  Limited,  of  London,  was  named  as 
trustee  for  the  debenture  stock  issued  by  these  companies. 
The  territory  of  operation  was  in  Iowa  and  the  surrounding 
States. 

Another  company  of  the  same  type  mentioned  by  Mr. 
McKee  was  the  West  of  Scotland,  American  Investment 
Company,  Limited.  It  was  also  operating  in  Iowa,  South 
Dakota,  and  Minnesota.  Of  all  the  debenture  companies 
operating  in  the  early  nineties  only  one,  the  Iowa  Loan  and 
Trust  Company  of  Des  Moines,  remained  in  active  opera- 
tion in  1915.  Some  of  these  companies  appear  to  have 
overloaded  with  mortgages  and  to  have  become  involved  in 
difficulties  during  the  depression  in  the  nineties.  Even  the 
conservative  companies,  however,  have  encountered  a  de- 
clining market  for  their  debentures.  The  experience  of  the 
Iowa  Loan  and  Trust  Company  is  that  its  debenture  busi- 
ness has  declined  during  recent  years,  although  it  still  had 
outstanding,  in  1919,  approximately  $2,500,000  of  these 
bonds.  During  the  period  of  the  successful  business  of  this 
and  other  companies,  the  bonds  paid  interest  of  six  per 
cent  and  were  issued  for  ten  years.  At  five  per  cent  it  was 
also  possible  to  float  the  bonds  successfully,  but  only  a  few 
bonds  could  be  sold  at  a  lower  rate.  These  bonds  were 
amply  secured  by  carefully  placed  mortgages,  but  still  were 
uijable  to  compete  as  an  investment  with  the  farm  mortgage 
itself.«i« 

In  recent  years  there  seems  to  have  been  some  revival  of 
the  use  of  debenture  or  mortgage  bonds.  The  attention  of 
the  writer  has  been  called  to  an  Iowa  trust  company  which 
is  now  issuing  bonds  of  this  type.  It  appears  that  the 
primary  object  of  this  company  is  to  reach  the  small  in- 


280  HISTORY   OF    BANKING   IN   IOWA 

vestor  and  thus  find  an  outlet  for  large  mortgages.  Mort- 
gages on  Iowa  farm  land  totalling  at  least  $50,000  are  de- 
posited with  a  trustee,  and  debenture  bonds  are  then  issued 
and  sold  in  small  denominations.  Bonds  are  issued  to  run 
for  a  period  of  three  or  five  years  and  yield,  at  present,  five 
and  one-half  per  cent  to  the  investor.  There  is  no  ' '  spread ' ' 
between  the  interest  rate  on  the  mortgage  and  the  interest 
rate  on  the  bond.  The  profit  for  the  company  comes  in  the 
commission  of  one  or  two  per  cent  charged  the  borrower 
at  the  time  he  makes  his  loan.^^^ 

EXISTING  FAEM  MOETGAGE  COMPANIES 

Other  farm  mortgage  companies  of  a  different  type  have 
become  increasingly  numerous  in  Iowa  in  recent  years. 
Banks,  corporations,  and  individuals  have  specialized  in  the 
purchase  and  sale  of  farm  mortgages.  The  number  of  such 
companies  can  not  be  accurately  determined,  since  there  is 
no  way  of  definitely  classifying  them.  Membership  in  the 
Iowa  Farm  Mortgage  Association  may  perhaps  be  consid- 
ered as  satisfactory  a  test  as  any ;  but  even  this  organization 
is  not  composed  strictly  of  mortgage  companies,  nor  does 
its  roster  include  all  such  companies. 

The  Iowa  Farm  Mortgage  Association  was  organized  in 
1914.  A  preliminary  meeting  was  held  on  February  21, 
1914,  at  the  call  of  Frank  J.  Long,  D.  H.  McKee,  G.  M.  Titus, 
J.  F.  Webber,  and  H.  S.  Merrick.  The  first  annual  meeting 
was  held  in  Des  Moines  May  19,  1914,  G.  M.  Titus  of  Mus- 
catine serving  as  first  president.  Eegular  annual  meetings 
of  the  association  have  been  held  since  that  time.  The  pur- 
pose of  the  organization,  as  stated  in  the  preamble,  is  to 
maintain  the  high  standard  and  credit  of  Iowa  farm  mort- 
gage loans  at  home  and  abroad.  It  was  believed  that  this 
end  could  "best  be  secured  by  frequent  conferences,  ex- 
change of  views,  and  closer  cooperation  of  the  individuals 
and  representatives  of  firms  and  corporations  in  Iowa  who 


FARM  MORTGAGE  BANKING  281 

are  engaged  in  dealing  in  farm  mortgage  loans  ".^^^  The 
men^bership  was  expected  to  include  corporations,  firms,  or 
individuals  engaged  in  making  loans  or  in  the  purchase  and 
sale  of  mortgage  loans. 

A  list  of  the  members  furnished  by  F.  C.  Waples,  secre- 
tary of  the  association,  included  seventy-six  names  in  July, 
1921.  Of  this  number,  thirteen  were  incorporated  banks  or 
trust  companies.  Some  of  these  have  a  large  farm  mort- 
gage business,  but  are  not  devoting  their  entire  attention 
to  this  field.  Five  insurance  companies,  which  figure  more 
largely  as  purchasers  of  mortgages  than  as  dealers,  are  also 
members.  Of  the  remainder,  some  are  individual  dealers, 
but  forty-seven  are  incorporated  mortgage  companies. 

In  the  same  year  that  the  Iowa  Farm  Mortgage  Associa- 
tion was  started,  a  national  organization  was  launched.  A 
preliminary  meeting  was  held  in  May,  and  the  first  annual 
convention  assembled  at  Chicago  on  October  7  and  8,  1914. 
In  defining  and  determining  the  membership  the  founders 
of  the  association  undertook  ''to  establish  as  a  distinct,  well 
organized  profession,  the  business  of  'farm  mortgage  bank- 
ing' ".  Brokers  and  dealers  in  city  mortgages  were  ex- 
cluded on  the  ground  that  they  were  not  farm  mortgage 
bankers.  In  order  to  eliminate  unreliable  dealers  the  mini- 
mum capital  of  a  firm  eligible  to  membership  was  fixed  at 
$25,000.  In  general  the  purposes  of  forming  the  association, 
as  stated  in  the  preamble  of  the  constitution,  are :  to  encour- 
age intelligent  State  and  national  legislation;  to  secure  uni- 
formity of  practice ;  to  aid  in  public  discrimination  between 
dealers  and  securities;  and  to  give  opportunity  for  those 
engaged  in  the  business  to  exchange  ideas,  form  personal 
acquaintances,  and  enjoy  the  fellowship  of  association  meet- 
ings. In  1917  fourteen  Iowa  institutions  were  listed  as 
members  of  the  national  association.^!^ 

The  business  of  a  farm  mortgage  company  consists  in 
making  loans,  or  purchasing  mortgages  already  made,  and 


282  HISTORY    OF    BANKING    IN    IOWA 

selling  the  same  to  investors.  Very  few  now  issue  their 
own  debentures  for  sale,  and  as  a  general  rule  they  do  not 
guarantee  the  mortgages  sold,  although  at  least  one  Iowa 
company  has  recently  announced  its  intention  of  selling 
guaranteed  mortgages.*^ ^^  To  protect  their  reputation  for 
dealing  only  in  sound  securities,  the  conservative  companies 
look  out  for  the  interest  of  their  clients  in  case  of  any 
trouble.  They  do  not,  however,  incur  any  legal  responsibil- 
ity to  do  so.  Many  smaller  investors  accept  the  opinion  of 
the  attorney  of  the  mortgage  company  as  to  the  validity 
of  the  title  and  other  legal  points  connected  with  the  draw- 
ing up  and  recording  of  the  mortgage.  On  the  other  hand, 
some  investors,  especially  the  life  insurance  companies,  rely 
wholly  on  the  opinion  of  their  own  attorney. 

MAKKET  FOR  IOWA  FAEM  MORTGAGES 

Mortgage  dealers  sell  their  securities  to  private  investors, 
savings  banks,  insurance  companies,  colleges,  and  other 
endowed  institutions,  and  other  brokers.  Although  the 
largest  holders  of  Iowa  mortgages  are  the  insurance  com- 
panies, the  testimony  of  the  dealers  is  that  the  best  market 
for  their  offerings  is  with  private  investors.  The  other 
buyers  are  equipped  to  place  their  capital  directly  in  many 
cases,  hence  do  not  rely  on  the  dealers  for  their  investments. 
The  profits  of  the  mortgage  companies  come  from  cash  com- 
missions charged  the  borrower  and  from  being  able  to  sell 
mortgages  in  blocks  at  a  lower  net  rate  to  the  investor  than 
is  charged  the  borrower.^^^ 

Insurance  companies,  as  was  shown  earlier  in  this  chap- 
ter, have  been  heavy  investors  in  Iowa  farm  mortgages. 
Out  of  a  total  of  $828,568,867  invested  in  mortgages  by  all 
insurance  companies  on  December  31,  1916,  $195,782,521  or 
nearly  one-fourth  were  Iowa  mortgages.  The  State  second 
to  Iowa  in  respect  to  the  amount  of  insurance  money  loaned 
therein  was  Missouri  with  $73,528,633.^^^     In  placing  this 


FARM  MORTGAGE  BANKING  283 

large  volume  of  loans,  three  methods  are  used  by  the  insur- 
ance companies :  to  make  loans  through  special  representa- 
tives working  for  the  company  on  a  salary  or  commission 
basis ;  to  buy  from  brokers  and  mortgage  companies  in  large 
blocks  after  special  examination  of  the  security;  and  to 
appoint  county  agents  to  make  the  loans  for  them.^^^  H.  S. 
Nollen,  vice  president  of  the  Equitable  Life  Insurance  Com- 
pany of  Iowa,  told  the  mortgage  bankers  at  their  1919  con- 
vention that  the  companies  rely  in  considerable  part  on  the 
man  out  in  the  field,  the  men  represented  in  the  gathering 
before  him.^^^ 

The  market  for  the  sale  of  mortgages  to  savings  banks  is 
practically  limited  to  Illinois,  Wisconsin,  Vermont,  New 
Hampshire,  and  Iowa.  Owing  to  injudicious  loaning  by  the 
savings  banks  of  New  England  during  the  early  nineties,  in- 
vestment in  real  estate  mortgages  outside  of  the  State  was 
denied  by  the  laws  of  three  of  the  New  England  and  many 
other  eastern  States.  Vermont  and  New  Hampshire  were 
an  exception.  Leslie  M.  Shaw  is  reported  to  have  loaned 
very  extensively  for  Vermont  bankers  through  his  bank  at 
Denison,  Iowa,  during  the  seventies  and  eighties.  Vermont 
savings  banks  continue  to  invest  heavily  in  outside  mort- 
gages, the  total  being  stated  at  $45,000,000  in  1915 — prin- 
cipally on  land  in  the  Mississippi  Valley.^^^  Iowa  continues 
to  receive  a  share  of  this  money.  The  repeal  of  the  restric- 
tive laws  in  other  eastern  States  would  broaden  the  market 
for  Iowa  farm  mortgages.  This  is  something  Iowa  mort- 
gage men  have  hoped  to  see  brought  about.  In  addition 
to  loans  made  directly  by  savings  banks  in  their  own  terri- 
tory, Iowa  savings  banks  in  certain  sections  are  heavy  pur- 
chasers of  mortgages  handled  by  the  regular  mortgage  com- 
panies. 

The  sale  of  Iowa  mortgages  to  endowed  institutions  and 
to  individuals  has  not  been  limited  to  Iowa,  although  there 
has  been  a  good  market  here  for  these  securities.     In  1915 


284  HISTORY    OF    BANKING    IN    IOWA 

the  State  census  showed  a  total  of  twenty-seven  endowed 
institutions  for  higher  education  with  an  enrollment  of 
10,148  students.^'^  The  amount  of  their  productive  endow- 
ment and  the  amount  of  it  which  is  invested  in  Iowa  mort- 
gages are  not  given,  but  may  safely  be  assumed  to  be  con- 
siderable. Until  recently  there  have  not  been  many  indi- 
viduals in  Iowa  with  free  capital  seeking  investment,  but 
the  number  of  these  has  rapidly  increased  in  recent  years. 
Many  farms  have  been  sold  during  1918  and  1919,  the  terms 
of  sale  requiring  the  vendor  to  carry  a  large  percentage  of 
the  purchase  price  in  a  mortgage  on  the  land.  If  the  holder 
of  the  mortgage  wishes  to  realize  cash  on  the  same,  he  must 
seek  some  purchaser  other  than  the  banks  and  insurance 
companies,  which  are  limited  to  loans  not  exceeding  fifty 
per  cent  of  the  value  of  the  mortgaged  property.  Acting  as 
brokers  for  such  parties  would  appear  to  offer  an  increasing 
field  of  activity  for  the  mortgage  companies. 

INTEEEST  BATES 

The  rates  charged  for  real  estate  loans  throughout  Iowa's 
history  are  not  available.  In  the  early  fifties  the  standard 
rate  was  forty  per  cent,  with  usually  an  added  profit  for  the 
banker  if  he  could  enter  on  the  land  with  warrants  given 
by  the  government  for  service  in  the  War  of  1812,  the  Indian 
wars,  or  the  Mexican  War,  which  were  often  sold  by  the 
veterans  at  a  considerable  discount.  During  the  nineties 
loans  were  made  at  about  six  per  cent  on  good  security.  In 
the  decade  preceding  the  World  War  many  loans  were  made 
at  five  per  cent  with  an  added  cash  commission  of  from 
one  to  two  per  cent  at  the  time  of  making  the  loan,  on  a 
straight  five  year  mortgage.  The  rates  increased  somewhat 
during  the  war.  The  only  exception  to  this  condition  was 
in  case  of  those  rates  granted  by  vendors  in  order  to  secure 
a  higher  price  for  their  land.    In  some  localities  the  rate  of 


FARM  MORTGAGE  BANKING  285 

five  per  cent  was  maintained  under  those  circumstances  and 
was  a  factor  in  stimulating  land  sales. 

The  rates  realized  by  insurance  companies  in  recent  years 
are  a  fair  indication  of  the  cost  of  the  loans  for  the  period 
covered.  On  December  31,  1914,  the  average  rate  on  $139,- 
511,101  of  outstanding  loans  in  Iowa  was  5.32  per  cent.  Two 
years  later  the  rate  was  5.28  per  cent  on  all  the  outstanding 
Iowa  farm  mortgages.  On  the  business  written  from  Janu- 
ary 1  to  September  30,  1917,  the  average  rate  was  5.18  per 
cent.^^^  This  does  not  represent  the  total  cost  to  the  bor- 
rower who  usually  pays  a  cash  commission  in  addition  which 
adds  from  one-fourth  to  one-half  per  cent  annually  to  the 
average  cost  of  the  loan.  By  the  spring  of  1919  the  cheap- 
est money  available  on  the  best  securities  was  at  five  and 
one-half  per  cent,  with  a  cash  commission  of  one  per  cent 
and  expenses  also  borne  by  the  borrower.  At  the  June, 
1919,  meeting  of  the  Iowa  Farm  Mortgage  Association,  L. 
H.  Bush,  special  loan  agent  at  Des  Moines  of  the  North- 
western Mutual  Life  Insurance  Company  of  Milwaukee,  an- 
nounced that  he  was  in  a  position  to  loan  funds  at  five  and 
one-half  per  cent  for  terms  of  either  five  or  ten  years.  In 
1920  the  average  rate  of  interest  reported  by  the  Federal 
census  was  five  and  one-half  per  cent.  The  high  interest 
rates  prevailing  on  all  classes  of  loans  during  1920  raised 
mortgage  rates  to  a  minimum  of  six  per  cent,  while  most 
loans  were  placed  at  still  higher  figures.^^^ 

Practically  all  of  the  loans  made  in  Iowa  by  banks,  insur- 
ance companies,  and  individuals  are  straight  term  mort- 
gages, five  years  being  the  most  common  period.  The  cus- 
tom has  been  to  allow  optional  payments  after  the  first  year, 
usually  in  sums  of  not  less  than  $100.  Interest  is  payable 
semi-annually.  H.  S.  Nollen,  vice  president  of  the  Equit- 
able Life  Insurance  Company  of  Iowa,  in  discussing  insur- 
ance investment  for  the  future  at  the  1919  meeting  of  the 
Iowa  Mortgage  Association  said,  however,  that  he  believed 


286  HISTORY    OF    BANKING    IN    IOWA 

the  insurance  companies  would  also  offer  amortized  loans 
hereafter.^-^ 

FORECLOSUKES  AND  LOSSES 

The  record  of  losses  and  foreclosures  on  Iowa  farm  mort- 
gages is  another  phase  of  the  history  which  would  prove 
interesting  if  definite  facts  were  available.  It  is  known  that 
there  was  wholesale  loss  occasioned  by  the  panic  of  1857. 
Again,  during  the  crisis  in  the  seventies  there  was  doubt- 
less some  increase  in  foreclosures.  The  partial  crop  failure 
of  1894  was  followed  by  the  abnormally  low  prices  for  the 
large  crop  of  1896,  and  the  result  was  hard  times  for  the 
farmer  during  the  nineties,  but  even  then  most  debtors 
weathered  the  strain.  In  the  pioneer  sections  of  Nebraska, 
the  Dakotas,  and  Kansas  the  losses  were  very  heavy.  In 
those  days  it  was  not  uncommon  in  western  Iowa  to  see  the 
passing  ''prairie  schooner"  from  those  sections  carrying 
the  pioneer  back  to  his  former  home.  He  had  taken  the 
risks  of  a  new  country  and  lost.  Usually  the  plucky  farmer 
had  stayed  on  until  there  remained  only  a  few  household 
furnishings,  a  wagon  or  two,  and  several  half  starved 
horses.  Iowa  farmers  were  in  a  better  position  to  meet  the 
adverse  conditions  and  very  few  were  forced  to  lose  their 
farms  under  foreclosure. 

In  more  recent  years  the  rapid  rise  in  land  values  has 
made  losses  on  carefully  placed  loans  virtually  impossible. 
L.  H.  Bush  stated  to  the  Iowa  farm  mortgage  bankers  at 
their  1919  convention  that  he  had  represented  the  North- 
western Mutual  Life  Insurance  Company  in  Iowa  for 
twenty-four  years,  and  during  that  time  had  had  only  two 
foreclosures.  In  both  cases  the  matter  was  satisfactorily 
settled,  without  loss  to  the  company,  before  leaving  the 
court  house.  The  savings  banks  of  Vermont  held  nearly 
$45,000,000  of  mortgages  in  1915  originating  in  the  Middle 
West  and  West.  The  State  bank  commissioner  reported 
that  during  the  preceding  six  years  losses  on  mortgages  had 


FARM  MORTGAGE  BANKING  287 

been  sustained  not  to  exceed  $12,000,  and  ''practically  all 

of  that  was  lost  through  the  dishonesty  of  an  agent  in  the 

west."«24 

PEOPOSED  STATE  EURAL  CREDIT  LAW 

In  spite  of  the  favorable  situation  in  Iowa  regarding  farm 
mortgages,  both  from  the  standpoint  of  the  investor  and 
of  the  borrower,  the  State  was  affected  by  the  general  agi- 
tation for  an  improved  system  of  ''rural  credits"  which 
culminated  during  President  Taft's  administration  in  the 
appointment  of  a  commission  to  study  the  rural  credit  situ- 
ation in  Europe.  D.  P.  Hogan,  president  of  the  Farmers 
Savings  Bank  of  Massena,  Iowa,  who  had  been  member  of 
this  commission,  undertook  to  secure  the  passage  of  a  bill 
establishing  State  farm  mortgage  banks  at  the  1915  session 
of  the  Iowa  legislature.  The  plan  as  outlined  by  Mr.  Hogan 
provided  for  the  incorporation  of  State  farm  mortgage 
banks  with  capital  of  not  less  than  $50,000.  Their  incorpo- 
ration was  to  follow  the  law  for  the  incorporation  of  ordi- 
nary banks  of  deposit.  Farm  mortgage  loans  made  on  land 
worth  at  least  twice  the  amount  loaned  thereon  were  to  be 
deposited  with  the  Auditor  of  State,  upon  which  security 
bonds  could  be  issued  by  the  bank.  The  limit  of  the  bonds 
so  issued  was  to  be  twenty  times  the  capital  and  surplus  of 
the  bank.  The  bill  provided  for  supervision  of  the  loans  and 
bond  issues.  Bonds  were  to  be  in  convenient  denominations 
to  meet  the  needs  of  all  classes  of  investors.  Originally  the 
bill  provided  that  the  bonds  should  be  tax  exempt,  but  it  was 
later  amended  to  specify  that  the  bonds  be  taxed. 

On  March  18,  1915,  the  bill  passed  the  House  by  a  vote 
of  ninety-six  to  three.  In  the  Senate  the  bill  met  determined 
opposition.  It  was  amended  very  decidedly,  and  finally 
failed  of  passage  by  a  vote  of  twenty  to  twenty-four.  Mean- 
time The  Northtvestern  Banker  had  asked  D.  P.  Hogan, 
author  of  the  bill,  and  Henry  Jayne,  vice  president  of  the 
Hershey  State  Bank,  Muscatine,  to  present  both  sides  of 


288  HISTORY    OF    BANKING    IN   IOWA 

the  question  of  the  desirability  of  the  measure.  Mr.  Jayne  's 
first  objection  to  the  bill  was  that  it  would  destroy  accounts 
in  the  savings  banks,  thus  substituting  for  a  very  successful 
and  sound  means  of  promoting  thrift  one  which  he  regarded 
as  very  uncertain  at  best.  A  more  serious  objection  which 
he  raised  to  the  bill  was  the  inadequacy  of  the  provisions 
for  examining  and  appraising  the  land  upon  which  the 
money  was  to  be  loaned.  He  asserted  that  all  that  was  re- 
quired was  that  the  property  should  be  appraised  by  farmer 
neighbors  of  the  applicant  who  would  not  personally  assume 
responsibility  for  any  loss  which  might  occur.  The  bill  it- 
self failed  of  passage  and  its  provisions,  as  amended,  never 
appeared  in  print.  If  this  defect  did  exist  in  the  degree 
charged  by  Mr.  Jayne,  it  would  have  been  easy  to  amend 
it  in  this  particular.  The  defeat  of  the  bill  was  probably 
due  in  part  to  the  general  feeling  of  satisfaction  with  exist- 
ing agencies,  which  made  it  impossible  to  get  the  farmers 
of  the  State  strongly  back  of  the  measure.  Its  failure  may 
be  traced  directly  to  the  opposition  of  the  mortgage  bankers. 
This  appears  to  have  been  the  only  strong  effort  to  secure 
State  legislation  on  mortgage  banking.^^^ 

FEDEEAL  FARM  LOAN  SYSTEM 

By  an  act  approved  on  July  17, 1916,  Congress  established 
the  Federal  farm  loan  system.  At  the  head  of  the  system 
is  the  Federal  Farm  Loan  Board,  a  bureau  in  the  Treasury 
Department,  consisting  of  four  members  appointed  by  the 
President,  with  the  Secretary  of  the  Treasury  a  member 
ex  officio.  The  country  was  divided  into  twelve  districts,  in 
each  of  which  was  located  a  Federal  land  bank.  No  State 
was  to  be  divided  between  two  or  more  districts,  and  in 
fixing  the  districts  it  was  the  purpose  of  the  organization 
committee  to  put  States  with  well-recognized  farm  mortgage 
securities  in  the  same  district  with  one  or  more  States  the 
value  of  whose  land  was  not  so  well  stabilized.     On  that 


FARM  MORTGAGE  BANKING  289 

basis  the  eighth  district  was  composed  of  Iowa,  Nebraska, 
South  Dakota,  and  Wyoming  with  the  Federal  land  bank 
located  at  Omaha.*^^^ 

It  was  provided  that  within  the  district  local  organiza- 
tions could  be  formed  of  ten  or  more  borrowing  farmers 
known  as  national  farm  loan  associations.  These  were  the 
institutions  through  which  loans  by  the  Federal  land  banks 
were  to  be  placed.  In  case  no  association  existed  in  a  given 
locality  the  land  bank  was  authorized  to  appoint  some  exist- 
ing State  bank  as  agent  in  making  loans  and  collecting  pay- 
ments. In  addition  to  the  Federal  land  banks  and  their 
auxiliaries,  the  system  provided  for  joint  stock  land  banks 
to  be  independently  organized  by  private  individuals  but 
under  the  supervision  of  the  Federal  Farm  Loan  Board.®-'^ 

The  minimum  capital  of  the  Federal  land  banks  was  fixed 
at  $750,000  each,  and  the  act  provided  that  if  within  thirty 
days  after  the  opening  of  the  subscription  books  any  part 
of  the  minimum  capitalization  remained  unsubscribed  it 
should  be  taken  up  by  the  government.  Practically  all  of 
the  original  stock  was  subscribed  by  the  Secretary  of  the 
Treasury  on  behalf  of  the  United  States.*'^^  On  June  30, 
1919,  the  government  still  owned  $570,110  of  stock  in  the 
Omaha  bank.^^^  Borrowers  are  required  to  subscribe  to  the 
bank's  capital  to  the  extent  of  five  per  cent  of  the  loan  re- 
ceived. In  this  way  the  permanent  capital  will  be  secured 
and  the  original  subscriptions  of  the  government  or  indi- 
viduals retired  at  par.  When  the  subscriptions  to  capital 
stock  by  the  national  farm  loan  associations  equalled  the 
minimum  of  $750,000,  twenty-five  per  cent  of  all  subscrip- 
tions made  thereafter  were  applied  toward  the  retirement 
of  such  stock.^^"  The  stock  held  by  farm  loan  associations 
in  the  Omaha  bank  amounted  to  $844,820  on  December  31, 
1918,  and  on  June  30,  1919,  it  totaled  $1,643,560.  In  the 
meantime  the  bank  retired  a  portion  of  its  original  govern- 
ment owned  stock,  reducing  the  amount  during  the   six 

19 


290  HISTORY    OF    BANKING    IN    IOWA 

months  from  $710,670  to  $570,110.^31  jt  ^^s  intended  that 
the  banks  should  be  owned  by  the  borrowers  cooperatively 
and  that  the  government  subsidy  should  be  but  temporary. 
The  provision  of  the  act  which  placed  the  Federal  Farm 
Loan  Bureau  under  the  Treasury  Department  saddled  the 
expense  of  that  portion  of  the  system  on  the  public.  This 
feature  is  of  such  doubtful  expediency  that  an  effort  has 
been  made  to  amend  the  law  to  place  the  expenses  of  the 
Bureau  upon  the  banks  operating  under  the  system.  A  bill 
to  this  effect  was  passed  by  the  Senate  during  the  second 
session  of  the  Sixty-sixth  Congress  but  failed  to  pass  the 
House  so  that  this  subsidy  still  remains.^^^ 

Loans  are  usually  made  by  the  Federal  land  banks 
through  the  national  farm  loan  associations.  These  are  or- 
ganizations of  ten  or  more  farmers  desiring  to  borrow  an 
aggregate  of  at  least  $20,000.  Each  member  is  required  to 
subscribe  to  the  capital  of  the  association  an  amount  equal 
to  five  per  cent  of  the  amount  he  wishes  to  borrow  and 
assumes  an  additional  liability  for  a  like  amount.  In  this 
way  the  associations  are  cooperative  societies  of  borrowers. 
The  principal  officers  of  the  association  are  the  secretary- 
treasurer  and  a  loan  committee.  The  latter  must  pass  on 
and  approve  all  loans  before  they  are  sent  on  to  the  land 
bank  for  examination.  Each  land  bank  has  its  own  apprais- 
ers who  also  pass  on  the  security  before  it  is  accepted 
by  the  bank.  The  loan  committee  of  the  national  farm  loan 
association  must  be  unanimous  in  its  report  upon  the  pro- 
posed loan  and  all  sign  a  written  report  to  that  effect.  The 
land  bank  appraiser  must  also  send  in  a  favorable  written 
report  before  the  loan  is  granted,  the  extent  of  his  investiga- 
tion being  prescribed  by  the  Federal  Farm  Loan  Board.^^^ 

The  loans  through  the  national  farm  loan  associations 
may  be  made  only  to  actual  farmers,  the  purpose  being  to 
confine  the  services  of  the  system  to  the  man  who  tills  the 
soil  and  not  to  extend  it  to  the  land  speculator.    In  inter- 


FARM  MORTGAGE  BANKING  291 

preting  this  part  of  the  act  the  legal  department  of  the 
Omaha  bank  has  been  very  lenient  in  its  rulings.  If  the  land 
is  rented  under  a  proposition  which  can  be  construed  as  a 
partnership,  or  if  it  is  operated  by  a  member  of  the  family, 
it  may  be  construed  as  coming  under  the  provisions  of  the 
law.  The  minimum  loan  is  $100  and  the  maximum  $10,000 
to  one  individual.  Critics  of  the  system  have  pointed  out 
that  the  maximum  limit  provision  has  been  evaded  by  allow- 
ing a  borrower  to  give  a  deed  to  some  other  member  or 
members  of  the  family  for  a  portion  of  the  farm  so  that 
two  or  more  loans  of  the  maximum  amount  have  been  made 
on  what  is  in  reality  a  single  farm.  Loans  may  not  be  made 
in  excess  of  fifty  per  cent  of  the  appraised  value  of  the  land 
and  twenty  per  cent  of  the  insured  value  of  the  buildings. 

Money  borrowed  from  the  Federal  land  bank  may  be  used 
only  for  the  following  purposes:  to  provide  for  the  pur- 
chase of  agricultural  land,  equipment,  fertilizers,  and  live 
stock  necessary  for  the  proper  and  reasonable  operation  of 
the  mortgaged  farm ;  to  provide  for  buildings  and  other  im- 
provement of  farm  lands;  and  to  liquidate  a  pre-existing 
indebtedness.^^^ 

Loans  under  the  Federal  farm  loan  system  may  be  made 
for  a  term  of  from  five  to  forty  years.  The  policy  of  the 
Federal  land  banks  at  the  outset  has  been  to  encourage  long 
time  loans,  usually  for  thirty-four  and  one-half  years. 
Money  borrowed  may  not  be  repaid  in  less  than  five  years 
even  if  the  borrower  should  have  the  funds  and  desire  to 
do  so.  All  loans  must  be  made  on  the  amortization  plan,  a 
certain  payment  being  made  each  year  on  the  principal  as 
well  as  the  interest  payments.  To  illustrate,  a  $1000  loan  at 
six  per  cent,  the  maximum  rate  that  may  be  charged,  can 
be  fully  paid  in  twenty  years  by  adding  $26.52  per  year  to 
the  interest  of  $60.00,  making  a  total  of  $86.52  divided  into 
semi-annual  payments.  At  five  and  one-half  per  cent,  the 
rate  at  which  most  loans  have  been  made  by  the  Federal  land 


292  HISTORY    OF    BANKING    IN    IOWA 

banks,  the  charge  would  be  proportionately  less.  After  the 
first  five  years  the  borrower  may  make  additional  payments 
in  sums  of  $25  or  any  multiple  thereof  at  any  regular  in- 
stallment date.®^^ 

The  Federal  farm  loan  act  limited  the  maximum  interest 
rate  which  might  be  charged  on  farm  loans  by  institutions 
under  its  provisions  to  six  per  cent  per  annum.  During  the 
first  months  of  operation  the  rate  charged  borrowers  by 
the  Federal  land  banks  was  five  per  cent.  Owing  to  the 
financial  conditions  produced  by  the  war  the  rate  was  raised 
early  in  1918  to  five  and  one-half  per  cent  and  in  the  spring 
of  1921  to  six  per  cent.  The  rates  of  the  joint  stock  land 
banks  have  been  one-half  per  cent  higher,  six  per  cent  being 
the  prevailing  rate  in  1919.  No  commissions  are  charged 
the  borrower,  but  the  expenses  of  determination  of  title,  the 
actual  cost  of  appraisal,  legal  fees,  and  recording  charges 
are  charged  to  the  applicant  for  a  loan.^^^ 

To  obtain  the  funds  to  make  loans  beyond  the  amount  of 
their  capital  stock.  Federal  land  banks  issue  bonds  secured 
by  farm  mortgages  not  less  in  aggregate  amount  than  the 
sum  of  the  bonds  proposed  to  be  issued.  The  mortgages 
given  as  collateral  are  placed  in  the  custody  of  the  farm  loan 
registrar  who  holds  them  in  his  name  as  trustee.  No  issue 
of  farm  loan  bonds  can  be  made  without  the  written  ap- 
proval of  the  Federal  Farm  Loan  Board.  Interest  on  bonds 
may  not  exceed  five  per  cent  per  annum,  they  must  run  at 
least  five  years,  and  be  issued  in  series  of  not  less  than 
$50,000.  The  interest  rate  and  other  terms  are  prescribed 
by  the  Board  under  these  limitations. 

In  order  to  provide  a  standard  security  which  would 
appeal  to  all  classes  of  investors  the  denominations  of  bonds 
range  from  $40  to  $10,000.  The  bonds  are  held  to  be  ''in- 
strumentalities of  the  Government  of  the  United  States", 
and  as  such  they  and  the  income  derived  therefrom  were 
made  exempt  from  Federal,  State,  municipal,  and  local  tax- 


FARM  MORTGAGE  BANKING  293 

ation.  At  the  time  of  the  framing  of  the  act  Federal  income 
taxation  was  relatively  insignificant,  but  with  the  greatly 
increased  rates  of  Federal  taxation  due  to  the  war,  this  tax 
exemption  feature  of  the  Federal  farm  loan  bonds  has  made 
them  increasingly  attractive  to  wealthy  investors.^^"^ 

In  order  to  enable  the  land  banks  to  continue  granting 
loans  and  not  interfere  with  the  sale  of  Liberty  bonds  the 
Secretary  of  the  Treasury  was  authorized,  on  January  18, 
1918,  to  buy  farm  loan  bonds  to  an  amount  not  to  exceed 
$100,000,000  in  each  of  the  fiscal  years  ending  June  30, 1918, 
and  June  30,  1919.^^^  These  operations  made  the  United 
States  Treasury  the  heaviest  purchaser  of  bonds  during  the 
first  two  years  of  operation.  Some  of  these  bonds  were  sub- 
sequently repurchased  by  the  banks  at  the  purchase  price 
for  resale  to  private  investors.  Large  blocks  of  bonds  have 
been  marketed  by  investment  bankers,  apparently  chiefly  to 
wealthy  investors  who  wish  to  escape  taxation.  A  few 
bonds  have  been  sold  by  the  Federal  Land  Bank  of  Omaha 
direct  to  Iowa  investors.  Bonds  were  offered  at  lOli^  and 
accrued  interest,  and  $79,350  were  sold  in  this  way  to  Iowa 
investors  during  the  first  six  months  of  operation.^^^ 

The  Federal  Land  Bank  of  Omaha  began  its  operations 
about  March  1, 1917 ;  the  president  chosen  was  D.  P.  Hogan 
of  Massena,  Iowa.  By  October,  1917,  loans  to  the  amount  of 
$3,730,590  had  been  made,  of  which  only  $138,000  were  in 
Iowa.  To  encourage  the  formation  of  national  farm  loan 
associations  the  Omaha  bank  advised  bankers  that  it  was 
prepared  to  contract  for  the  organization  of  associations, 
allowing  a  commission  of  one-half  per  cent  on  the  loans  ap- 
proved. Any  bank  appointed  was  to  serve  as  secretary- 
treasurer  of  the  association,  and  thus  eliminate  most  of  the 
expense  for  the  local  organization.  Many  bankers  took  ad- 
vantage of  this  opportunity.^*^  It  gave  the  banker  a  reason- 
able commission  and  an  opportunity  to  retain  control  of  the 
farm  mortgage  situation  in  his  community.    At  the  outset 


294  HISTORY    OF    BANKING   IN   IOWA 

the  number  of  associations  formed  varied  directly  with  the 
prevailing  rates  of  interest  on  private  capital  in  the  various 
States.''^^  This  situation  seems  to  have  changed  somewhat 
in  more  recent  months.  On  November  30,  1919,  there  were 
138  associations  in  Iowa  with  2539  members  and  loans  of 
$17,995,150.  This  placed  Iowa  second  to  Texas  in  the  total 
amount  loaned  within  the  State  by  the  Federal  land  banks. 
The  average  size  of  the  loans  for  the  country  as  a  whole 
was  $2637;  the  Iowa  loans  averaged  $7087  each.«" 

JOINT  STOCK  LAND  BANKS 

Joint  stock  land  banks  authorized  under  the  Federal  farm 
loan  act  are  in  some  ways  independent  of  the  other  part  of 
the  system  and  in  some  ways  dependent  upon  it.  They  are 
capitalized  with  private  capital,  and  all  loans  are  made  to 
the  individual  borrower  either  directly  or  through  a  local 
agency.  They  are  freed  from  many  restrictions  placed  on 
the  Federal  land  banks.  The  borrower  is  not  required  to 
be  an  actual  farmer;  no  restrictions  are  put  on  the  use  he 
may  make  of  the  money  borrowed ;  and  the  amount  of  the 
loan  is  not  limited  to  $10,000  as  in  the  case  of  Federal  land 
banks.  The  bond  issues  are  also  quite  distinct.  On  the 
other  hand,  the  joint  stock  land  banks  depend  on  the  serv- 
ices of  the  land  bank  appraisers  and  farm  loan  registrar. 
Loans  may  not  be  made  above  fifty  per  cent  of  the  valuation 
of  the  land  and  twenty  per  cent  of  the  insurable  valuation  of 
the  buildings ;  these  loans  must  be  made  on  the  amortization 
plan,  they  may  not  bear  interest  above  six  per  cent  and  they 
must  have  a  maturity  of  from  five  to  forty  years.  Loans 
made  by  a  joint  stock  land  bank  are  confined  to  the  State 
within  which  it  has  its  principal  office  and  one  other  con- 
tiguous State.  Loans  are  further  limited  to  fifteen  times 
the  capital  and  surplus  of  the  bank.^^^ 

Such  banks  may  be  formed  by  any  number  of  persons  not 
less  than  ten  with  a  capital  stock  of  not  less  than  $250,000. 


FARM  MORTGAGE  BANKING  295 

They  are  incorporated  by  the  Federal  government  on 
much  the  same  basis  as  national  banks.  Stockholders  incur 
a  double  liability  on  the  stock  owned  by  them.  Federal 
examiners  must  examine  and  report  the  condition  of  every 
joint  stock  land  bank  at  least  twice  each  year.  The  bonds 
issued  by  the  joint  stock  land  banks  are  secured  by  mort- 
gages in  the  custody  of  the  farm  loan  registrar  of  the  dis- 
trict in  which  it  is  located.^ ^* 

By  November  30,  1919,  thirty  joint  stock  land  banks  had 
been  chartered  in  the  entire  country.^^'^  The  first  charter 
to  be  issued  was  granted  to  the  Iowa  Joint  Stock  Land  Bank, 
located  at  Sioux  City,  Iowa,  with  authority  to  make  loans  in 
Iowa  and  South  Dakota.^^^  The  First  Joint  Stock  Land 
Bank  of  Chicago,  and  the  Lincoln  Joint  Stock  Land  Bank 
of  Lincoln,  Nebraska,  were  also  making  loans  in  Iowa  by 
January,  1919.^*^  During  the  early  months  of  1919  five 
banks  were  added  to  the  number  previously  operating  in 
Iowa.    They  were  located  as  follows: 

The  Fremont  Joint  Stock  Land  Bank,  at  Fremont,  Ne- 
braska. 

The  Central  Iowa  Joint  Stock  Land  Bank,  at  Des  Moines, 
Iowa. 

The  Peters  Joint  Stock  Land  Bank,  at  Omaha,  Nebraska. 

The  First  Joint  Stock  Land  Bank,  at  Minneapolis,  Min- 
nesota. 

The  Des  Moines  Joint  Stock  Land  Bank,  at  Des  Moines, 
lowa.^^^ 

The  Illinois  Joint  Stock  Land  Bank  of  Monticello,  Illinois, 
was  also  authorized  to  loan  in  Iowa,  but  at  the  latest  report 
had  not  made  any  loans  in  this  State.  Statistics  of  the  vol- 
ume of  business  done  by  the  joint  stock  land  banks  in  Iowa 
show  that  loans  of  $23,924,095  had  been  closed  up  to  May 
31,  1920.  Practically  all  of  this  was  outstanding  at  that 
date.  The  volume  of  business  in  Iowa  alone  represented 
nearly  one-third  of  the  total  for  the  entire  country.    It  is  in 


296  HISTORY    OF    BANKING    IN    IOWA 

the  corn  belt  States  of  the  Mississippi  Valley  that  the 
great  bulk  of  the  business  of  joint  stock  land  banks  appears 
to  have  been  done.®*^ 

It  was  expected  that  private  capitalists  operating  bond  or 
mortgage  companies  under  State  incorporation  would  re- 
charter  as  joint  stock  land  banks,  thereby  taking  advantage 
of  the  prestige  of  government  supervision  and  of  the  exemp- 
tion of  their  securities  from  taxation.  This,  however,  has 
not  been  the  case  to  any  considerable  degree  as  yet. 

The  failure  of  the  system  to  attract  private  capital  in 
large  amounts  may  be  explained  in  various  ways.  Certain 
defects  and  uncertainties  in  the  law  prevented  existing  in- 
stitutions from  becoming  joint  stock  land  banks.  In  dis- 
cussing the  question  before  the  Iowa  Farm  Mortgage  Asso- 
ciation in  1918,  E.  D.  Chassell  pointed  out  five  changes 
which  a  committee  of  the  Farm  Mortgage  Bankers  Associa- 
tion of  America  had  sought  to  secure  in  the  law:  first,  to 
place  the  joint  stock  banks  on  a  par  with  the  Federal  land 
banks  by  increasing  the  lending  power  to  twenty  times  the 
capital  and  surplus ;  second,  to  raise  the  maximum  interest 
rate  to  six  and  one-half  per  cent  in  order  to  meet  war  con- 
ditions, and  to  warrant  loaning  in  the  territory  where  higher 
rates  prevail;  third,  to  permit  an  extension  of  the  territory 
in  which  joint  stock  land  banks  might  operate  to  the  entire 
United  States  instead  of  limiting  their  operations  to  two 
States ;  fourth,  so  to  amend  the  law  as  definitely  to  protect 
the  capitalist  against  the  possibility  of  arbitrary  political 
control;  finally,  to  define  clearly  the  right  of  banks  to  sell 
bonds  at  a  premium.^ ^^ 

Even  if  these  changes  should  be  made  there  would  still 
doubtless  be  many  companies  which  would  not  care  to 
change  their  present  status.  The  minimum  capitalization 
of  $250,000  would  serve  to  prevent  many  Iowa  mortgage 
companies  from  becoming  joint  stock  land  banks,  since  many 
of  them  are  at  present  carrying  on  a  successful  business 


FARM  MORTGAGE  BANKING  297 

with  a  much  lower  capitalization.  Opportunity  for  rapid 
turnover  of  capital  is  greatly  reduced  by  the  Federal  sys- 
tem. Under  the  plan  followed  by  the  average  mortgage 
company,  there  is  no  fixed  relation  between  the  volume  of 
business  which  they  are  permitted  to  do  and  the  capital  of 
the  company.  Every  mortgage  is  sold  outright  on  its  merits 
and  the  dealer  has  no  further  financial  responsibility  there- 
for. Under  the  mortgage  bond  plan  of  the  Federal  system 
the  capital  of  the  joint  stock  bank  serves  as  a  kind  of  safety 
fund  for  the  additional  protection  of  the  bond  holders.  The 
law,  therefore,  limits  the  loans  to  fifteen  times  the  capital 
stock  of  the  bank.  A  successful  mortgage  company  in  Iowa 
reports  sales  of  $5,500,000  in  two  years  made  with  a  capital 
of  $100,000,  or  more  than  fifty  times  its  capitalization.''^^ 
Bonds  issued  by  the  joint  stock  land  banks  have  usually  had 
a  maturity  of  twenty  years.  To  enable  this  company  to  con- 
tinue its  present  volume  of  sales  over  a  period  of  years 
would,  therefore,  require  it  to  multiply  its  present  capital 
many  times. 

There  are,  moreover,  certain  institutions  which  are  de- 
terred from  entering  the  system  because  of  the  unsatisfac- 
tory experience  of  the  old  debenture  companies.*'^"  D.  P. 
Hogan,  president  of  the  Federal  Land  Bank  of  Omaha,  has 
undertaken  to  meet  this  argument  by  charging  that  the 
weakness  of  the  old  debenture  companies  was  the  lack  of 
standardization  and  government  supervision.^^^  But  it  has 
been  shown  that  even  where  conservatively  managed  the 
debenture  companies  were  not  able  to  market  the  bonds 
readily  at  a  low  rate  of  interest. 

Again,  there  exists  a  large  class  of  borrowers  who  prefer 
the  present  plan  of  straight  mortgages,  at  a  flat  rate  with 
the  privilege  of  optional  payments.  Straight  mortgages 
usually  bear  a  somewhat  higher  rate  to  the  investor  than 
mortgage-secured  bonds.  The  tax  exemption  feature  is  of 
no  advantage  to  educational,  religious,  and  benevolent  insti- 


298  HISTORY   OF   BANKING   IN   IOWA 

tutions  whose  property  is  not  taxable  or  to  the  small  saver 
whose  money  and  credits  usually  escape  taxation.  Nor 
could  foreign  investors  gain  anything  by  this  feature.  A 
disadvantage  of  bonds  as  an  investment  for  insurance  com- 
panies is  that  the  market  value  will  be  subject  to  fluctua- 
tions, whereas  a  mortgage  does  not  have  a  varying  market 
value. 

The  Iowa  Joint  Stock  Land  Bank  of  Sioux  City  was  or- 
ganized by  the  same  interests  that  control  the  Farmers  Loan 
and  Trust  Company  of  that  city.  Borrowers  are  thus  given 
their  choice  of  making  loans  on  the  amortized  plan  or  on  the 
straight  mortgage  basis.  The  old  constituency  of  borrowers 
and  investors  can  thus  be  retained.  At  the  outset  bankers 
were  in  doubt  as  to  whether  they  could  become  officers  of  a 
joint  stock  land  bank  and  at  the  same  time  retain  their  other 
interests.  When  Charles  E.  Lobdell,  of  the  Federal  Farm 
Loan  Board,  assured  the  members  of  the  Farm  Mortgage 
Bankers  Association  at  the  1917  convention  that  the  Board 
had  ''made  a  final  and  different  construction",  his  an- 
nouncement was  received  with  applause.  Mr.  Lobdell  ear- 
nestly invited  the  mortgage  bankers  of  the  country  to  come 
into  the  system  as  joint  stock  land  banks,  use  it,  and  help  to 
improve  it.  He  pledged  the  support  of  the  Federal  Farm 
Loan  Board  toward  securing  any  reasonable  amendment.^^* 
The  same  thing  was  strongly  urged  upon  the  Iowa  mortgage 
men  by  James  F.  Toy,  president  of  the  Iowa  Joint  Stock 
Land  Bank,  at  the  1918  meeting  of  the  Iowa  Association. 
He  saw  in  the  law  a  number  of  objectionable  features  but 
believed  they  could  be  eliminated  by  cooperation.^^^ 

THE  TAX  EXEMPTION  ISSUE 

In  spite  of  these  suggestions  the  Iowa  mortgage  bankers 
have  continued  to  be  opponents  of  the  Federal  farm  loan 
system.  Their  attack  has  centered  on  the  tax  exemption 
feature  of  the  law.    At  the  1918  meeting  of  the  Iowa  Farm 


FARM  MORTGAGE  BANKING  299 

Mortgage  Association  the  following  resolution  was  passed : 
"Resolved,  That  we  regard  the  tax  exemption  feature  of  the 
federal  farm  loan  act  as  unjust  and  of  a  class  nature  and 
that  Congress  should  repeal  this  feature  of  the  law. ' '  This 
resolution  was  opposed  by  some  of  the  members  on  the 
ground  that  it  would  do  no  good  to  pass  the  resolution  and 
would  be  regarded  as  passed  in  the  selfish  interest  of  the 
mortgage  bankers.  James  F.  Toy  moved  to  strike  out  the 
paragraph,  but  upon  a  division  of  the  house  his  motion  was 
lost.^^^  Again  at  the  1919  and  1920  conventions  the  Associa- 
tion went  on  record  as  favoring  the  repeal  of  the  tax  exemp- 
tion feature.^  ^^ 

During  the  spring  of  1919  the  mortgage  bankers  con- 
ducted a  campaign  against  the  tax  exemption  feature  of  the 
Federal  farm  loan  act.  Their  propaganda  was  directed  to 
the  bankers  of  Iowa  and  was  met  by  strong  counter  argu- 
ments by  representatives  of  the  Federal  Land  Bank.  E.  D. 
Chassell,  secretary  of  the  Farm  Mortgage  Bankers  Associa- 
tion of  America,  and  M.  L.  Corey,  attorney-registrar  for 
the  Federal  Land  Bank  of  Omaha,  engaged  in  a  warm  debate 
before  some  of  the  group  meetings  of  the  Iowa  Bankers  As- 
sociation. Space  was  granted  them  in  the  June  number  of 
The  Northwestern  Banker  to  set  forth  their  views,  and  the 
opinions  of  the  bankers  were  invited  as  to  the  merits  of  the 
proposition.  Mr.  Corey  asserted  that  the  tax  exemption 
feature  was  an  essential  part  of  the  system  and  that,  know- 
ing this,  the  farm  mortgage  bankers  were  undertaking  to 
kill  the  system  by  **  tearing  out  an  important  piece  of  the 
structure. "  Mr.  Chassell  objected  to  the  growing  volume  of 
tax-free  securities  and  especially  attacked  the  provisions  of 
the  existing  law  granting  these  bonds  greater  privileges 
than  most  Liberty  bonds.^^^ 

In  August,  1919,  a  test  suit  was  instituted  to  determine 
the  constitutionality  of  the  tax  exemption  of  the  Federal 
land  bank  bonds  and  the  joint  stock  land  bank  bonds.    The 


300  HISTORY    OF    BANKING    IN    IOWA 

members  of  the  Farm  Mortgage  Bankers  Association  of 
America,  as  individuals,  raised  the  fund  to  instigate  the 
suit,  but  it  was  not  brought  under  the  official  direction  of  the 
Association.  The  case  was  first  heard  before  Judge  A.  S. 
Van  Valkenberg  in  the  Federal  District  Court  at  Kansas 
City.  At  the  conclusion  of  the  argument,  on  October  31st, 
the  court  dismissed  the  bill.  The  case  was  immediately  ap- 
pealed to  the  Supreme  Court  of  the  United  States,  where 
the  hearing  w^as  set  for  January  5th.  The  Supreme  Court 
submitted  the  case  for  reargument  on  April  26,  1920,  but 
since  oral  arguments  for  that  term  of  court  closed  April 
30th,  the  case  had  to  go  over  to  the  October  term.  The  de- 
cision of  the  court  was  announced  on  February  28,  1921, 
sustaining  the  constitutionality  of  the  entire  act. 

Pending  the  final  disposition  of  this  case  the  activities  of 
the  Federal  land  banks  were  curtailed  and  the  operations 
of  the  joint  stock  land  banks  were  practically  suspended. 
On  February  4,  1920,  the  Federal  Farm  Loan  Board  issued 
an  order  to  the  Federal  land  banks  asking  them  to  hold  all 
future  applications  in  abeyance,  but  permitting  them  to 
close  the  loans  already  accepted.  Since  it  was  impossible 
to  market  bonds  satisfactorily  while  the  case  was  pending, 
the  land  banks,  with  the  approval  of  the  Board,  borrowed 
money  from  banks  in  various  cities.  These  loans  were  sub- 
ject to  call  and  secured  by  farm  mortgages  as  collateral. 
The  loans  were  made  with  the  expectation  that  a  decision 
would  be  reached  by  the  court  early  in  1920.  It  was  not  ex- 
pected that  the  commercial  banks  would  furnish  long  time 
credit,  nor  were  they  in  a  position  to  do  so  in  view  of  the 
general  credit  situation.^ ^^ 

When  the  Supreme  Court  ordered  the  case  reargued  the 
Federal  Farm  Loan  Board  sought  relief  through  legislation. 
Congress  was  asked  to  extend  the  provisions  of  the  act  as 
passed  in  January,  1918,  which  had  authorized  the  Treasury 
Department  to  purchase  not  to  exceed  $100,000,000  of  Fed- 


FARM  MORTGAGE  BANKING  301 

eral  farm  loan  bonds  in  any  fiscal  year.  The  law  originally 
gave  this  authority  only  for  the  years  1918  and  1919.  A 
joint  resolution  was  adopted  by  Congress  authorizing  the 
purchase  of  such  bonds  when  issued  against  loans  approved 
before  March  1,  1920.  Under  this  resolution  the  Treasury 
had  available  the  unused  portion  of  the  original  $200,000,000 
appropriation  amounting  to  $64,000,000  for  the  purchase  of 
bonds.  The  banks  were  not,  however,  placed  in  a  position 
to  make  any  further  loans.  No  relief  whatever  was  granted 
to  the  joint  stock  land  banks.  The  result  was  that  during 
the  spring  of  1920,  a  season  of  unusually  heavy  demand  for 
farm  loans,  the  Federal  system  was  unable  to  function  to 
any  considerable  degree.  Most  of  the  joint  stock  land  banks 
adopted  the  policy  of  marking  time  until  the  litigation  was 
concluded  and  a  few  even  went  into  voluntary  liquidation. 
The  net  mortgage  loans  of  the  joint  stock  land  banks  in- 
creased only  from  $54,686,234  on  November  30,  1919,  to 
$77,958,642  on  December  31,  1920.  During  the  same  period 
the  twelve  Federal  land  banks  were  only  able  to  increase 
their  loans  from  $284,137,419  to  $346,000,000.««*> 

It  is  not  within  the  province  of  this  historical  survey  to  go 
into  the  merits  of  the  tax  exemption  controversy.  The  prob- 
lem is  complicated  because  of  the  two  types  of  institutions 
operating  under  the  provisions  of  the  Federal  farm  loan  act. 
Federal  land  banks  are  cooperative  non-profit  making  insti- 
tutions. If  bonds  are  sold  at  a  more  favorable  rate  because 
of  tax  exemption,  the  savings  should  go  to  the  borrowing 
farmer  in  reduced  interest  rates  or  dividends  on  stock  in 
the  land  bank.  Joint  stock  land  banks,  on  the  other  hand, 
are  private  corporations  operated  for  the  profit  of  the  stock- 
holders. There  is  practically  no  restriction  on  the  size  of 
loans  which  they  may  make  and  loans  may  be  made  to  any 
landowner  whether  he  is  a  farm  operator  or  not.  For  this 
reason  the  joint  stock  land  banks  have  been  subject  to  spe- 
cial attack  upon  this  point.     A  bill  was  introduced  in  the 


302  HISTORY   OF   BANKING   IN   IOWA 

United  States  Senate  to  repeal  the  tax  exemption  privilege 
for  all  bonds  issued  by  the  joint  stock  land  banks.  The 
amendment  if  passed  would  not  have  affected  the  Federal 
land  bank  bonds. 

War  taxation  and  the  issue  of  Liberty  bonds  intensified 
the  opposition  to  tax  exempt  securities.  When  the  Federal 
farm  loan  act  was  passed  in  1916  the  rates  of  the  Federal 
income  tax  were  relatively  low.  Exemption  from  State  and 
local  taxation  was  then  more  important  than  exemption 
from  Federal  taxation.  The  passage  of  the  war  revenue 
acts,  which  raised  the  income  tax  rates  to  a  high  point,  put  a 
premium  on  tax  exempt  bonds  for  the  wealthy  investor. 
Farm  loan  bonds  were  superior  in  this  respect  to  all  but  the 
issues  of  low  yielding  Liberty  bonds. 

Under  a  uniform  general  property  tax,  mortgage  taxation 
involves  double  taxation  of  the  same  property.  State  laws 
have  in  some  instances  sought  to  avoid  this  in  their  methods 
of  taxing  mortgages,  but  there  is  no  uniformity  in  the  mat- 
ter. The  Iowa  law  does  not  allow  a  landowner  to  make  any 
deduction  from  the  assessed  value  of  his  property  because 
of  mortgage  indebtedness.  A  $50,000  farm  is  taxed  the 
same,  with  or  without  a  mortgage  standing  against  it.  The 
holder  of  a  mortgage  is  also  taxed  on  the  full  value  of  the 
mortgage.  Before  1911  the  tax  rate  in  Iowa  on  the  mortgage 
would  have  been  the  same  as  that  on  other  property.  The 
rate  on  moneys  and  credits  is  now  a  uniform  flat  rate  of  five 
mills  on  the  dollar,  or  $5  per  $1000.^®^  The  incidence  of  the 
tax  on  the  mortgage  is  not  certain.  The  theory  of  the 
framers  of  the  Federal  farm  loan  act  was  that  it  had  been 
borne  by  the  borrowing  farmer  in  the  form  of  increased 
interest  rates.  If  all  personal  property  were  taxed,  this 
would  probably  be  true.  The  tax  is  so  widely  evaded  that 
probably  it  is  in  considerable  part  a  tax  on  honesty  and 
ignorance.  Thus,  while  exemption  from  State  taxes  is  still 
an  important  advantage  possessed  by  these  bonds,  their 


FARM  MORTGAGE  BANKING  303 

superiority  for  the  rich  investor  now  lies  primarily  in  the 
freedom  from  Federal  income  taxation. 

EFFECTS  OF  THE  FEDERAL  FARM  LOAN  SYSTEM 

Too  short  a  time  has  elapsed  to  judge  as  to  the  probable 
place  which  the  Federal  farm  loan  system  will  occupy  in  the 
future  of  the  Iowa  mortgage  business.  On  May  31, 1920,  the 
aggregate  loans  made  in  the  State  by  the  Federal  Land 
Bank  of  Omaha  and  the  eight  joint  stock  land  banks  oper- 
ating in  Iowa  was  $46,956,445.  This  total  represented  less 
than  ten  per  cent  of  the  estimated  amount  of  outstanding 
farm  mortgages  but  exceeded  that  of  any  other  State — 
Texas  being  second  with  about  $44,000,000.^*^2 

Whether  or  not  the  Iowa  farmer  has  secured  the  advan- 
tage of  lower  interest  rates  because  of  the  competition  of  the 
Federal  farm  loan  system  can  not  be  easily  determined  be- 
cause of  the  disturbing  influence  of  the  war.  On  the  $61,- 
152,392  of  new  loans  granted  by  life  insurance  companies  in 
Iowa  during  the  first  nine  months  of  1917,  the  interest  rate 
was  5.18  per  cent.  This  was  during  the  time  the  Federal 
land  banks  were  being  organized  and  before  their  influence 
was  felt.  At  the  outset  the  rate  of  the  Federal  land  banks 
was  five  per  cent.  The  rates  were  subsequently  raised  to 
five  and  one-half  per  cent,  and  in  1921  to  six  per  cent,  and 
at  these  rates  the  insurance  companies  and  other  established 
lending  agencies  have  been  able  to  compete  effectively.  In 
other  States,  even  in  the  eighth  district,  the  situation  seems 
to  be  entirely  different.  In  Wyoming  $29,400  of  new  loans 
were  added  by  the  insurance  companies  to  their  former  total 
of  $381,462,  during  the  period  from  January  1,  to  September 
30,  1917.  On  the  new  loans  the  rate  was  7.43  per  cent;  on 
those  in  force  December  31, 1916,  the  rate  was  7.97  per  cent. 
Insurance  companies  scrutinize  their  loans  very  carefully 
and  accept  only  the  best.  It  is  safe  to  assume  therefore  that 
most  of  these  loans  would  have  been  acceptable  if  made  to 


304  HISTORY    OF   BANKING   IN   IOWA 

farm  operators  under  the  Federal  farm  loan  act.  Bor- 
rowers in  that  State  would  be  able  to  effect  a  saving  of 
about  two  per  cent  per  annum. 

It  is  the  purpose  of  the  system  to  make  interest  rates  as 
nearly  uniform  over  the  entire  United  States  as  practicable. 
Doubtless  such  wide  variations  as  formerly  existed  were 
unwarranted,  but  the  effort  to  bring  the  Iowa  and  Wyoming 
borrowers  to  the  same  level  appears  to  be  contrary  to  the 
economic  principle  of  higher  interest  rates  where  risks  are 
greater.  Before  the  Federal  farm  loan  system  makes  very 
serious  inroads  on  the  half  billion  or  more  of  Iowa  farm 
mortgages  it  will  have  to  make  a  rate  lower  than  other  loan 
organizations.  A  uniform  rate  will  force  private  capital  out 
of  the  more  hazardous  territory  into  still  more  active  com- 
petition in  the  ''favored  territory"  of  the  Upper  Missis- 
sippi Valley  States.  Only  one  State,  Illinois,  had  as  favor- 
able a  rate  from  the  insurance  companies  as  had  Iowa  in 
^927  663  ijiq  bring  the  general  interest  rate  for  all  mort- 
gages below  that  now  prevalent  in  Iowa  and  Illinois  would 
seem  to  be  very  difficult  indeed.  Therefore  large  oppor- 
tunity will  continue  to  exist  for  private  capital  in  the  mort- 
gage business  in  Iowa. 

Bankers  appear  to  be  unduly  alarmed  over  any  form  of 
government  competition.  When  the  postal  savings  bank 
law  was  pending  the  bankers  attacked  it  violently.  The 
same  sort  of  fight  was  waged  on  the  Federal  reserve  system, 
and  the  most  dire  results  were  predicted  to  follow  its  estab- 
lishment. In  both  cases  the  fears  of  the  bankers  have 
proved  unfounded.  In  the  same  manner  the  mortgage  bank- 
ers seem  to  have  become  unduly  exercised  over  the  future  of 
their  business  in  competition  with  the  Federal  farm  loan 
system.  It  would  seem  desirable  so  to  amend  the  law  as  to 
make  the  present  farm  mortgage  machinery  an  effective 
part  of  the  system.  The  attitude  of  criticism  by  mortgage 
dealers  might  well  be  supplanted  by  a  larger  spirit  of  co- 


FARM  MORTGAGE  BANKING  305 

operation  in  the  interest  of  securing  necessary  changes  in 
the  law.  0.  M.  Corwin,  president  of  the  Farm  Mortgage 
Bankers  Association  of  America,  in  his  annual  address  at 
the  1918  convention  urged  his  colleagues  to  cultivate  this 
spirit.^^^ 

EECAPITULATION 

In  the  mid-nineteenth  century  lending  on  mortgage  secu- 
rity appears  to  have  been  a  large  part  of  the  business  of 
the  banker.  Distinctly  commercial  banking  was  first  suc- 
cessfully carried  on  by  the  State  Bank  of  Iowa,  which  was 
prohibited  from  making  real  estate  loans.  The  national 
banks,  which  succeeded  it  as  the  dominant  financial  institu- 
tions in  the  State,  were  also  prohibited  from  loaning  on  real 
estate  security.  State  and  savings  banks  have  not  been 
restricted  by  law  from  making  farm  loans,  but  in  large 
measure  have  not  found  it  profitable  to  tie  up  funds  in  long 
time  investment  credit.  Accordingly  the  farm  mortgage 
business  has  been  largely  handled  by  other  lending  agencies. 

The  established  private  institutions  have  met  the  legiti- 
mate demands  of  the  Iowa  land  owner  under  fairly  satis- 
factory terms.  Instances  of  the  use  of  ''loan  shark"  meth- 
ods were  not  infrequent  in  the  pioneer  days,  but  had  become 
almost,  if  not  quite,  a  thing  of  the  past  by  the  close  of  the 
nineteenth  century.  Iowa  mortgages  have  been  looked  upon 
by  investors  as  a  very  desirable  form  of  investment  secu- 
rity. Losses  were  practically  negligible.  From  the  stand- 
point of  the  borrower  the  terms  have  been  considered  favor- 
able. No  strong  demand  existed  among  Iowa  farmers  for 
State  or  Federal  rural  credit  legislation.  The  agitation 
which  culminated  in  the  creation  of  the  Federal  farm  loan 
system  was  started  on  behalf  of  the  farmers  in  less  favored 
territory.  In  spite  of  the  recent  court  decision  upholding 
the  tax  exemption  of  Federal  farm  loan  bonds  and  the  joint 
stock  land  bank  bonds,  the  mortgage  situation  in  Iowa  will 
probably  not  be  seriously  affected. 

20 


XIII 
SPECIAL  TYPES  OF  BANKING 

It  is  the  purpose  of  the  present  chapter  to  consider  some 
of  the  newer  specialized  types  of  banking  which  have  ap- 
peared in  Iowa.  With  the  exception  of  the  postal  savings 
banks,  these  institutions  are  not  banks  of  deposit.  They 
are  not  under  the  supervision  of  the  State  Department  of 
Banking,  although  some  of  them  use  the  name  bank  or  its 
derivatives  in  their  title.  In  the  future  this  will  be  pro- 
hibited to  new  institutions  of  the  same  type.  For  the  most 
part  the  field  of  operation  within  which  they  confine  their 
business  is  distinctly  defined.  The  location  of  these  insti- 
tutions will  be  shown  to  be  chiefly  in  the  urban  centers ;  the 
bank  in  the  rural  communities,  like  the  general  store,  serves 
all  the  needs  of  its  patrons.  In  the  cities  the  banks  have  en- 
larged their  field  by  creating  various  departments.  Never- 
theless there  are  classes  of  individuals  or  types  of  business 
which  can  best  be  taken  care  of  by  specialized  institutions. 

MOEEIS  PLAN  COMPANIES 

A  new  type  of  institution  which  made  its  first  appearance 
in  Iowa  in  1916  was  established  by  the  Morris  Plan  com- 
panies. The  commercial  banking  system  has  not  in  all 
places  been  in  a  position  to  extend  a  line  of  credit  to  the 
wage-earner  or  small  tradesman  who  needed  to  borrow. 
The  security  offered  and  the  size  of  the  loan  were  such  that 
the  city  bank  could  not  economically  make  these  loans. 
Often  illness,  family  misfortune,  or  the  necessity  for  new 
tools  or  equipment  are  legitimate  reasons  for  borrowing 
by  the  wage-earner.  Into  this  neglected  field  of  industrial 
credit  in  our  cities  the  dubious  pawn  broker  entered.    The 

306 


SPECIAL  TYPES  OF  BANKING 


307 


borrower  who  was  without  banking  facilities  but  whose  posi- 
tion was  somewhat  above  that  of  the  pawn  customer  re- 
sorted to  commercial  money-lenders  who  demanded  a  mort- 
gage on  household  goods  or  an  assignment  of  salary.  The 
weapon  of  these  loan-sharks  was  usually  the  threat  of  pub- 
licity. Expenses  were  heavy  and  profits  large  so  that  the 
money  cost  of  the  loan  to  the  borrower  often  reached  a  very 
high  figure.^^^  Added  to  this  was  the  greater  cost  in  loss 
of  independence  and  self-respect  of  the  patron.  The  prac- 
tices of  the  loan-shark  are  deplorable,  but  he  has  been  a 
necessary  evil  in  some  communities  where  no  proper  substi- 
tute existed. 

In  1910  the  first  Morris  Plan  company  was  organized  at 
Norfolk,  Virginia,  by  Arthur  J.  Morris,  a  young  lawyer  who 
had  been  an  interested  student  of  European  systems  of  in- 
dustrial credit.  This  original  company  was  formed  with 
$20,000  capital  to  make  loans  on  personal  credit.  The  or- 
ganization proved  a  decided  success  and  was  soon  extended 
to  over  one  hundred  American  cities.  The  Morris  Plan  com- 
panies from  the  time  of  their  establishment  in  1910  to  Feb- 
ruary, 1919,  had  made  about  625,000  small  loans,  aggregat- 
ing considerably  over  $90,000,000.««« 

In  Iowa  four  companies  were  in  operation  on  June  30, 


Table  XHI 


Data  Concerning  the  Morris  Plan  Companies  in  Iowa^*^ 

Location 

Date  op 
Organization 

Paid  up 
Capital 

Loans  made  from  Date 

OP  Organization  to  June 

30,  1921 

Des  Moines 
Waterloo 
Cedab  Rapids 
Davenport 

Feb.         18,   1916 
April        16,    1916 
Nov.         14,    1916 
Apr.         30,    1917 

$     100,000 
60,000 
92,200 
60,000 

Number 

Amount 

11,387 
6,240 
6,358 
2,494 

$     2,453,821 

1,048,881 

1, OSS, 975 

904,078 

308  HISTORY   OF    BANKING   IN   IOWA 

1921.  The  location  of  these  companies  with  the  principal 
facts  concerning  them  are  given  in  Table  XIII. 

The  Industrial  Finance  Corporation  was  organized  in 
February,  1914,  to  centralize  and  standardize  the  Morris 
Plan  movement.  This  corporation  owns  about  twenty  per 
cent  of  the  capital  of  the  operating  companies,  it  holds  the 
copyright  to  the  Morris  Plan  name  and  various  other  ex- 
pressions necessary  to  the  operation  of  the  plan.  It  assists 
in  the  organization  of  new  companies,  sells  the  right  to  oper- 
ate the  Morris  Plan,  instructs  the  managing  force  in  the 
operation  of  the  new  company,  furnishes  forms  and  other 
items  of  equipment  and  exercises  a  cooperative  supervision 
over  all  of  the  different  companies.^^^  The  result  is  that 
companies  of  this  type  use  the  same  name  and  have  made 
use  of  the  distinctive  black  diamond,  with  the  words  "The 
Morris  Plan"  thereon,  in  their  signs,  and  engraved  on  all 
stationery  and  advertising  circulars.  Their  general  meth- 
ods are  also  practically  the  same  in  all  cities. 

At  the  second  annual  convention  of  the  managers  and 
representatives  of  the  Morris  Plan  companies,  held  in  New 
York  City  in  October,  1916,  there  was  organized  a  National 
Association  of  Morris  Plan  Bankers.  Its  purpose  was  to 
promote  the  national  development  of  the  Morris  Plan  sys- 
tem and  to  give  the  managers  the  advantage  of  personal 
acquaintanceship  and  interchange  of  ideas.^^® 

New  developments  of  the  Morris  Plan  include  an  insur- 
ance department  which  was  started  in  1917,  known  as  the 
Morris  Plan  Insurance  Society  and  organized  under  the 
New  York  State  laws.  By  the  payment  of  a  small  fee  a 
borrower  is  enabled  to  carry  insurance  to  cancel  his  debt 
in  the  event  of  his  death,  and  also  to  return  to  his  family 
the  amount  previously  paid  toward  the  liquidation  of  his 
loan.  The  insurance  society  had  written  22,245  contracts 
by  December  31, 1918,  but  had  not  done  any  business  in  Iowa 
up  to  that  date.    In  February,  1919,  the  officers  of  the  Indus- 


SPECIAL  TYPES  OF  BANKING  309 

trial  Finance  Corporation  reported  that  it  was  then  seeking 
a  license  to  operate  in  Iowa.  A  still  more  recent  develop- 
ment is  the  Morris  Plan  of  retail  trade  acceptances.  Details 
of  this  new  feature  of  the  system  are  not  available,  but  it  is 
expected  to  be  of  assistance  to  people  of  small  means  who 
desire  to  make  purchases  on  the  installment  plan.^^^ 

Loans  by  the  Morris  Plan  companies  are  made  on  the 
basis  of  character  as  security.  They  do  not  accept  pawns, 
chattel  mortgages,  or  salary  assignments  as  security  for 
loans.  The  note  given  must  be  signed  by  two  co-makers,  in 
addition  to  the  borrower,  who  are  willing  to  vouch  for  the 
character  of  the  borrower  and  become  responsible  with  him 
for  the  repayment  of  the  loan.  It  is  maintained  that  the 
system  reduces  the  risk  of  the  co-makers  to  a  minimum  be- 
cause of  the  thorough  investigation  made  of  the  borrower's 
character  and  ability  to  repay  the  loan  when  due.  It  is  the 
policy  of  the  companies  to  loan  only  when  satisfied  of  the 
ability  of  the  borrower  to  meet  the  loan,  not  relying  gener- 
ally on  the  credit  of  the  co-makers.  The  method  of  install- 
ment payments  and  the  well-organized  follow-up  system 
when  the  borrower  becomes  in  arrears  in  his  weekly  pay- 
ments strengthen  the  position  of  the  co-makers. 

The  manager  of  the  Cedar  Rapids  company  reports  that 
thousands  of  dollars  of  endorsements  are  made  by  mer- 
chants to  the  amount  of  their  bills.  Should  a  man  owe  the 
grocer  $25,  the  fuel  dealer  $25,  the  doctor  $25,  and  some 
other  creditor  $15  he  is  constantly  worried  by  bills  he  can 
not  pay  and  is  harassed  by  collectors  to  no  one  of  whom  he 
dares  give  preference.  The  Morris  Plan  company  will 
accept  the  endorsement  of  these  various  creditors,  limit  the 
liability  of  each  to  the  amount  he  receives,  and  mail  each 
one  a  check  for  the  amount  of  his  bill.  The  debtor  has  a 
clean  slate,  his  obligation  is  in  a  form  where  he  can  meet 
it  in  two  dollar  a  week  installments.  Should  he  default  on 
his  payments  the  endorsers  are  not  worse  off  than  formerly 


310  HISTORY    OF    BANKING    IN    IOWA 

since  they  have  the  same  opportunity  as  before  to  recover 
from  the  debtor.^'^^ 

The  process  of  making  a  loan  and  repaying  the  same  are 
standardized  for  all  associations  and  for  loans  of  all  sizes. 
For  every  $50  loan,  or  part  thereof,  the  borrower  agrees  to 
buy  an  investment  certificate  of  the  company  and  assign  it 
to  the  company  as  security  for  the  loan.  He  is  then  required 
to  make  weekly  payments  on  the  certificate.  Neglect  to 
make  the  weekly  payment  promptly  subjects  him  to  a  fine 
of  five  cents  on  each  $50  certificate  subscribed.  The  loans 
are  made  on  a  one  year  basis,  repayable  in  fifty  installments. 
When  the  fifty  payments  have  been  completed  the  full-paid 
certificates  are  surrendered  to  the  company  and  the  note 
cancelled. 

Interest  at  six  per  cent  per  annum  is  deducted  in  advance. 
An  investigation  charge  of  $1  is  made  on  each  $50  borrowed, 
but  not  to  exceed  $5  on  the  loan.  In  the  case  of  a  $100 
loan,  therefore,  the  borrower  would  receive  in  cash  $92.  He 
is  required  to  begin,  one  week  later,  weekly  payments  to- 
ward the  repayment  of  the  loan.  No  interest  is  allowed  for 
the  deposits  then  made.  The  managers  of  the  plan  liken 
these  deposits  to  the  balance  ordinarily  kept  in  the  bank  by 
the  commercial  borrower.  As  a  matter  of  fact  the  cost  of 
the  loan  to  the  borrower  is  considerably  over  six  per  cent 
when  there  is  added  the  investigation  cost,  and  the  loss  of 
interest  on  his  savings.  The  advantage  of  regular  repay- 
ment is,  however,  of  no  inconsiderable  weight.  Theoreti- 
cally the  borrower  might  secure  his  loan  from  a  commercial 
bank,  assuming  his  credit  to  be  good,  and  accumulate  a  fund 
with  which  to  repay  it  by  weekly  deposits  in  an  interest 
bearing  savings  account.  In  such  a  case  the  cost  would  be 
less  than  through  a  Morris  Plan  company.  Practically, 
however,  the  Morris  Plan  provides  a  scheme  of  repayment 
that  is  adapted  to  industrial  needs  and  is  sure  to  result  in 
liquidating  the  loan  when  due. 


SPECIAL  TYPES  OP  BANKING 


311 


In  addition  to  loans  based  on  character  and  earning  power 
as  security,  loans  are  also  made  on  certain  accepted  forms 
of  collateral,  which  includes  those  forms  which  would  ordi- 
narily be  accepted  at  a  commercial  bank.  The  Waterloo 
company  lists  full-paid  investment  certificates  of  the  Morris 
Plan  companies,  savings  bank  accounts,  securities  listed  on 
the  New  York  Stock  Exchange,  and  Liberty  bonds  as  ac- 
ceptable classes  of  collateral.  Out  of  1904  loans  made  by 
the  Cedar  Eapids  company  to  December  31, 1918,  it  appears 
that  434  were  based  on  collateral  and  1470  were  endorsed  by 
co-makers.®'^^ 

Before  granting  a  loan  the  Morris  Plan  companies  de- 
termine the  reason  for  borrowing.  The  facts  shown  in 
Table  XIV  were  compiled  from  the  records  of  the  Cedar 
Rapids  and  Waterloo  companies. 

Miscellaneous  and  business  debts  will  be  seen  to  lead  the 


Table  XIV 


Reasons  for  Borrowing  from  the  Morris  Plan  Companies  of 
Waterloo  and  Cedar  Rapids®^^ 

Waterloo 

Cedar  Rapids 

Sickness 

Death 

Birth 

Miscellaneous  Debts 

Business  Debts 

Home  Improvement 

Buying  Home 

Taxes 

Mortgage  and  Interest 

Loan  Sharks 

Education 

Vacation 

Beginning  Housekeeping 

Buying  Coal 

Liberty  Bonds 

Buying  Cab 

Insurance 

Christmas 

31 

2 

20 
517 

60 
8 
5 

12 
2 

22 
3 
4 
3 
9 
117 
3 
6 

137 
18 

1185 

230 

34 

18 

44 

20 

42 

8 

7 

13 

128 

16 

4 

312  HISTORY    OF   BANKING   IN   IOWA 

list.  Evidently  the  Waterloo  company  encouraged  patrons 
to  borrow  in  order  to  buy  Liberty  bonds.  In  Cedar  Rapids 
the  results  of  the  efforts  of  the  fuel  administration  may  be 
observed  from  the  large  number  who  borrowed  to  lay  in 
their  winter 's  coal  supply.  Sickness  has  been  an  important 
cause  of  borrowing.  A  considerable  number  of  persons 
seem  to  have  used  these  companies  to  escape  from  the  toils 
of  the  loan-shark.  A  more  detailed  and  intimate  knowledge 
of  the  reasons  for  borrowing  would  furnish  an  interesting 
study. 

The  list  of  occupations  of  the  borrowers  from  the  Cedar 
Rapids  company  classes  laborers  first  and  skilled  mechanics 
as  a  close  second.  Salesmen,  owners  or  partners  of  a  busi- 
ness, clerks,  teachers,  civil  service  employees,  professional 
people,  foremen,  managers,  and  housewives  are  classed  as 
borrowers.  The  nationality  of  borrowers  was  predomi- 
nantly American,  with  Bohemians  ranking  second;  the  lat- 
ter may  be  explained  by  the  fact  that  they  are  the  dominant 
foreign  element  of  the  city.  As  to  amounts  borrowed  the 
most  common  were  $50  or  $100,  these  two  representing  631 
and  629  of  the  loans  respectively.  The  largest  loan  granted 
by  the  Cedar  Rapids  company  was  $2000.  Of  the  borrowers 
782  owned  real  estate ;  1542  had  dependents ;  1631  were  men ; 
and  273  were  women.^'^^ 

The  losses  sustained  by  the  Morris  Plan  companies  are 
remarkably  small.  Although  the  data  for  the  Iowa  com- 
panies are  not  available  it  may  be  observed  that  the  general 
experience  of  Morris  Plan  companies  shows  a  surprising 
degree  of  safety.  It  has  been  demonstrated  that  with  pru- 
dent management  the  average  losses  will  not  exceed  one- 
fourth  of  one  per  cent.  The  Morris  Plan  company  at  Wash- 
ington, D.  C,  loaned  in  two  years  about  $750,000  to  4000 
borrowers,  and  sustained  only  one  loss  amounting  to  $60. 
The  statement  of  condition  of  the  Cedar  Rapids  company, 
as  of  December  31,  1918,  had  a  reserve  for  losses  of  only 


SPECIAL  TYPES  OF  BANKING  313 

$388  against  loans  of  $107,612.  This  company  is  conserva- 
tively managed  and  had  at  the  time  over  two  years  experi- 
ence upon  which  to  base  its  estimate  of  losses,  so  this  sum 
probably  indicates  fairly  well  the  proportion  of  its  losses.®'^ 

Ownership  of  the  capital  stock  of  the  Morris  Plan  com- 
panies is  divided  between  local  investors  and  the  Industrial 
Finance  Corporation  of  New  York  City  on  the  basis  of  about 
seventy-five  per  cent  and  twenty-five  per  cent  respectively. 
The  Iowa  companies  are  backed  by  the  best  business  inter- 
ests of  their  respective  cities.  These  men  look  upon  the  in- 
stitutions partly  from  a  sociological  and  philanthropic  point 
of  view.  The  companies  if  successfully  managed,  however, 
pay  good  dividends  to  the  stockholders.  The  Des  Moines 
company  in  1918  netted  seven  per  cent ;  and  the  Cedar  Rap- 
ids company  earned  over  six  per  cent.  The  executive  officer 
of  a  company  is  known  as  the  secretary-manager.  He  has 
charge  of  making  loans,  keeping  the  records,  receiving  in- 
stallments, and  carrying  out  the  policies  of  the  directors.^^^ 

Morris  Plan  companies  in  Iowa  are  organized  under  the 
general  incorporation  laws  of  the  State.  They  are  not  re- 
quired to  make  reports  or  subject  themselves  to  State  regu- 
lation. At  the  1919  session  of  the  General  Assembly,  how- 
ever, an  act  was  passed  which  permits  domestic  corpora- 
tions engaged  in  making  small  loans  to  deserving  persons, 
under  terms  similar  to  those  of  the  Morris  Plan  companies, 
to  come  under  the  jurisdiction  of  the  Auditor  of  State.  If 
they  elect  to  come  under  State  regulation  the  corporations 
are  to  file  reports  of  condition  before  January  15th  of  each 
year  and  are  also  to  be  subject  to  examination  at  the  discre- 
tion of  the  Auditor.  If,  as  a  result  of  the  reports  and  exam- 
inations, the  Auditor  is  satisfied  with  the  good  faith  of  the 
corporation  he  is  to  issue  to  it  a  certificate  to  that  effect. 
This  would  be  official  recognition  of  the  standing  of  these 
institutions  and  would  also  entitle  them  to  a  more  equitable 
rate  of  taxation.     They  are  to  be  taxed  on  the  net  actual 


314  HISTORY   OF    BANKING    IN   IOWA 

value  of  their  moneys  and  credits  at  the  rate  of  five  mills  on 
the  dollar.  The  law  was  approved  on  April  5,  1919,  but  no 
reports  were  to  be  submitted  before  January  15,  1920.^^" 

The  Morris  Plan  companies  are  not  alone  in  making  in- 
dustrial loans.  Thus  the  Davenport  company  reports  that 
there  are  three  or  four  loan  companies  in  that  city  doing  a 
good  business.®^^  These  companies  take  chattel  mortgages 
and  in  general  do  not  carry  on  the  business  in  the  same  man- 
ner as  the  Morris  Plan  companies.  Perhaps  some  of  them 
will  find  it  advantageous  to  come  under  the  provisions  of 
the  recent  law  and  thus  secure  State  recognition.  The 
standardization  of  the  Morris  Plan  banks  and  their  unique 
method  of  making  loans  marks  them  as  a  distinctive  type 
of  loan  companies.  Moreover,  the  nature  of  their  business 
is  such  that  they  do  not  compete  with  the  commercial  banks. 
In  Cedar  Rapids  ofiicers  or  directors  of  the  majority  of  the 
city's  commercial  banks  are  represented  on  the  directorate. 
The  field  for  institutions  of  this  type  is  limited  to  the  larger 
cities  or  industrial  centers  so  that  their  number  will  prob- 
ably never  be  large  in  Iowa,  but  their  usefulness  may  be 
expected  to  grow. 

FAKM  CEEDIT  COEPOEATIONS 

During  the  summer  of  1921  a  new  corporation  was 
launched  in  Iowa  as  a  means  of  aiding  in  the  financing  of 
Iowa  agriculture.  This  corporation  was  promoted  by  repre- 
sentatives of  the  bankers  and  farmers,  working  primarily 
through  the  Iowa  Bankers  Association  and  the  Iowa  Farm 
Bureau  Federation.  It  was  founded  to  meet  the  unfortunate 
experiences  of  the  farmers  in  the  post-war  deflation  period. 
It  is  not,  however,  a  temporary  makeshift,  but  a  permanent 
institution.  Other  corporations  of  the  same  type  may  also 
be  formed  if  the  conditions  seem  to  demand  their  estab- 
lishment. 

The  purpose  of  the  institution  is  to  create  capital  for 


SPECIAL  TYPES  OF  BANKING  315 

agricultural 'loans  varying  in  length  from  sixty  days  to  a 
year  or  even  longer.  A  farmer  may  make  direct  loans  from 
the  corporation  or  he  may  borrow  through  his  local  bank. 
It  is  to  make  advances  on  grain  stored  in  licensed  ware- 
houses, on  wool  warehouse  receipts,  for  cattle  feeding,  and 
for  other  purposes.  Funds  to  be  used  for  this  purpose 
beyond  the  original  capital  will  be  raised  by  the  sale  of  the 
company's  bonds  or  debentures.  The  plan  itself  is  new, 
but  the  principle  is  not ;  it  is  modelled  after  the  Edge  Act, 
passed  by  Congress  for  the  purpose  of  financing  foreign 
trade. 

In  order  to  make  it  possible  to  operate  legally  under  the 
plan  contemplated  it  was  first  necessary  to  secure  the  pas- 
sage of  certain  laws.  The  program  was  supported  in  the 
legislature  by  the  organizations  of  bankers  and  farmers. 
Subject  to  the  approval  of  the  Superintendent  of  Banking, 
State  banks,  savings  banks,  and  trust  companies  were  au- 
thorized to  invest  ten  per  cent  of  their  capital  and  surplus 
in  foreign  trade  financing  corporations  under  the  Edge  Act 
and  ten  per  cent  in  domestic  agricultural  corporations  of 
the  type  under  consideration.  In  no  event,  however,  could 
the  aggregate  so  invested  exceed  twenty  per  cent  of  the  cap- 
ital and  surplus  of  the  bank.  These  laws  were  necessary  in 
order  to  enable  banks  to  be  stockholders  in  the  new  corpo- 
ration. 

The  provisions  of  the  general  incorporation  law  limiting 
the  indebtedness  of  corporations  were  so  amended  as  not 
to  apply  to  a  corporation  having  $1,000,000  or  over  of  paid- 
in  capital  in  case  the  indebtedness  was  secured  by  obliga- 
tions such  as  this  organization  would  hold.  This  enables 
such  a  corporation  to  issue  its  own  debentures  or  bonds  up 
to  any  limit  when  properly  secured.  On  warehouse  receipts 
the  farmer  may  borrow  from  his  local  bank  seventy-five  per 
cent  of  the  market  value  of  the  commodity.  Such  paper 
properly  endorsed  by  the  bank  can  be  used  by  the  finance 


316  HISTORY    OF    BANKING    IN    IOWA 

corporation  as  a  security  for  bonds  or  debentures  for  one 
hundred  per  cent  of  its  actual  value.  For  cattle  feeding  the 
loan  may  amount  to  eighty  per  cent  of  the  value  of  the 
live  stock  but  such  obligations  can  be  used  as  security  for 
bond  issues  by  the  corporation  only  up  to  ninety  per  cent  of 
their  full  value.  This  seems  to  be  the  only  legal  limitation 
on  the  ratio  of  bonds  to  capital. 

Another  important  law,  necessary  in  order  to  make  it  pos- 
sible for  this  corporation  to  function  fully,  was  passed  pro- 
viding for  bonded  warehouses  and  storage  of  agricultural 
and  other  commodities.  Loans  on  grain  or  wool  will  be 
made  to  farmers  when  the  commodity  is  stored  in  a  licensed 
elevator  or  warehouse.^^^ 

The  Iowa  Farm  Credit  Corporation  is  the  pioneer  organi- 
zation under  the  new  laws.  Its  articles  of  incorporation 
were  filed  on  June  8,  1921.  The  authorized  capital  is  $5,- 
000,000;  but  at  the  outset  only  $1,000,000  of  stock  will  be 
sold.  It  is  planned  to  apportion  the  stock  geographically 
and  distribute  it  as  widely  as  possible.  Stock  subscriptions 
are  limited  to  $10,000  for  any  person.  Banks  have  been 
urged  to  buy  on  the  assurance  that  banks  which  are  stock- 
holders will  receive  first  consideration  among  applicants 
desiring  to  borrow  money  or  rediscount  with  the  corpora- 
tion. Farmers  were  circularized  and  urged  to  buy  on  the 
argument  that  it  is  ' '  the  farmers  of  this  state  for  whom  it  ie 
primarily  organized  to  serve. ' ' 

Control  of  the  Iowa  Farm  Credit  Corporation  is  vested  in 
a  board  of  thirty  directors  equally  representing  farming 
and  banking.  It  is  intended  that  these  directors  shall  be 
widely  distributed  throughout  the  State.  To  this  end  it  is 
provided  that  there  shall  be  one  farmer  and  one  banker  from 
each  of  the  eleven  districts  created  by  tiie  Iowa  Bankers  As- 
sociation in  its  State-wide  organization.  In  addition  there 
are  eight  other  directors  at  large.  The  first  President  is 
L.  A.  Andrew  of  Ottumwa,  retiring  President  of  the  Iowa 


SPECIAL  TYPES  OF  BANKING  317 

Bankers  Association ;  the  first  Vice  President  is  C.  W.  Hunt, 
President  of  the  Iowa  Farm  Bureau  Federation.  Frank 
Warner,  Secretary  of  the  Iowa  Bankers  Association,  has 
been  made  Executive  Secretary  and  F.  G.  Redfield,  Treas- 
urer. Included  in  the  list  of  officers  and  directors  of  the 
Iowa  Farm  Credit  Corporation  are  other  equally  prominent 
bankers  and  farmers. 

The  place  of  this  type  of  institution  in  the  financial  or- 
ganization of  Iowa  has  not  yet  been  demonstrated.  That 
commercial  banks  are  sometimes  unable  to  meet  the  local 
demand  for  credit  was  amply  demonstrated  during  the 
crisis  of  1920.  By  means  of  this  financing  plan  combined 
with  the  warehousing  plan  now  made  possible,  the  period 
of  marketing  of  farm  products  can  be  lengthened  and  a  more 
orderly  marketing  program  can  be  secured.  The  character 
of  this  agricultural  paper  is  such  as  to  make  it  eligible  for 
rediscount  at  the  Federal  reserve  banks  when  it  has  a  ma- 
turity of  not  over  six  months.  Two  reasons  may  be  ad- 
vanced for  adding  to  the  rediscounting  facilities  thus  af- 
forded through  the  Federal  reserve  system :  paper  of  longer 
maturity  may  be  taken  care  of;  and  less  than  one-fourth 
of  Iowa's  banks  are  now  members  of  the  system  and  the 
non-members  can  not  directly  avail  themselves  of  the  redis- 
count privilege. 

•  The  plan  seems  well  calculated  to  serve  its  purpose  of 
making  capital  available  to  Iowa  farmers.  The  debentures 
issued  will  have  as  security  the  capital  stock  of  the  company, 
the  farmer 's  personal  obligation,  the  warehouse  receipt,  or 
chattel  mortgage,  and  the  commodity  represented  thereby, 
and  the  endorsement  of  a  bank  when  loans  are  placed 
through  the  local  banks.  Investors  would  seemingly  regard 
this  as  an  attractive  type  of  paper.  The  pioneer  company's 
soundness  and  stability  is  best  evidenced  by  the  list  of  pro- 
moters. The  organizations  of  bankers  and  farmers  have 
given  it  their  support.     Although  organized  primarily  to 


318  HISTORY   OF    BANKING   IN   IOWA 

serve  agriculture,  it  is  expected  to  be  a  substantial  company 
with  fair  earnings.*^®'^ 

AUTO  LOAN  COMPANIES 

A  specialized  banking  service  for  financing  the  wholesale 
and  retail  sale  of  automotive  vehicles  has  recently  been  in- 
stituted in  Iowa.  In  October,  1917,  the  first  corporation  of 
its  kind  in  the  State  was  organized  in  Des  Moines.  The  com- 
mercial banks  were  not  equipped  with  the  credit  and  collec- 
tion machinery  necessary  to  handle  certain  classes  of  de- 
ferred payment  paper  given  for  the  purchase  of  automobiles 
or  trucks.  It  was  to  meet  the  demand  for  a  specialized  insti- 
tution, prepared  to  handle  this  type  of  business,  that  the 
pioneer  company  was  organized.  Other  companies  have 
since  been  formed  which  conduct  their  business  along  the 
same  lines.  The  original  companies  financed  the  sale  of 
new  cars,  but  with  the  growing  volume  of  sales  of  used  cars 
there  have  been  companies  formed  which  specialize  in  this 
phase  of  the  business.  Morris  Plan  companies  also  make 
loans  for  the  purpose  of  buying  service  cars  and  trucks. 

A  retail  transaction  is  financed  by  these  companies  by 
having  the  dealer  sell  the  vehicle  under  conditional  sale  con- 
tract which,  with  the  note  representing  the  deferred  pay- 
ments, is  assigned  to  the  mortgage  corporation.  The  en- 
dorsement of  the  dealer  is  required  on  the  note,  thus  making 
all  deferred  payment  paper  two-name.  This  makes  the 
note  very  suitable  for  purposes  of  rediscounting  or  for  use 
as  collateral.  The  service  of  the  companies  usually  includes 
the  furnishing  of  insurance  against  fire,  theft,  and  collision. 
This  protects  the  customer  and  also  the  company.  For  its 
own  protection  the  company  has  each  vehicle  covered  by  a 
wrongful  conversion  bond.  In  this  way  the  company  is 
protected  against  nearly  every  contingency  which  might 
result  in  loss. 

The  cost  of  the  service  is  added  to  the  cash  price  of  the 


SPECIAL  TYPES  OF  BANKING  319 

car  and  is  therefore  borne  by  the  purchaser.  He  is  required 
to  pay  down  thirty-three  and  one-third  per  cent  or  more  of 
the  purchase  price  of  the  car  in  cash  and  the  balance  in 
monthly  installments,  which  keep  pace  with  the  depreciation 
of  the  car.  The  dealer  receives  his  full  one  hundred  per 
cent  of  the  selling  price  as  soon  as  the  transaction  is  com- 
pleted. He  is  obliged  to  endorse  the  buyer's  note,  but  the 
purchase  contract  protects  him  from  loss  in  case  the  pur- 
chaser defaults  in  his  payments.  The  buyer  receives  the 
necessary  financial  accommodation  which  enables  him  to 
purchase  a  car  at  once.  To  be  sure,  the  insurance  which  is 
included  adds  to  the  cost  of  the  car,  but  a  prudent  buyer 
wants  this  protection  even  where  he  pays  cash  for  the  car. 
The  cost  of  the  credit  extended  is  not  shown  separately  in 
the  rate  sheets,  but  the  service  includes  the  cost  of  credit 
machinery  and  monthly  collections,  which  in  addition  to 
reasonable  profit  make  it  necessary  for  the  companies  to 
charge  a  rate  materially  above  the  usual  bank  interest  rate. 

The  usual  plan  of  the  companies  for  securing  funds  in  ad- 
dition to  their  own  capital  is  the  sale  of  collateral  trust 
notes  to  commercial  banks  or  individuals  having  surplus 
funds  to  invest.  Every  $1000  of  collateral  trust  notes  is 
secured  by  $1200  of  the  two-name  automobile  paper  depos- 
ited with  the  same  bank  or  trust  company  as  trustees.  Notes 
are  offered  in  denominations  of  from  $1000  to  $10,000  at 
discount  rates  that  yield  six  per  cent  to  seven  and  one-half 
per  cent  to  the  bank  which  buys  them.®^^ 

These  auto-loan  companies  have  operated  in  Iowa  for  too 
short  a  period  to  furnish  much  basis  for  judging  as  to  their 
future  place  among  Iowa's  financial  institutions.  Whether 
or  not  they  will  sustain  themselves  in  periods  of  business 
adversity  has  not  yet  been  demonstrated.  The  large  number 
of  automotive  vehicles  sold  annually  in  the  State  would 
seem  to  offer  a  good  field  for  their  operations  but  as  a 
matter  of  fact  only  a  very  few  are  in  operation.    During  the 


320  HISTORY   OF    BANKING   IN   IOWA 

past  few  years  most  of  the  automobile  manufacturers  have 
provided  plans  for  financing  the  sale  of  their  cars  on  a  de- 
ferred credit  plan  of  their  own,  thus  largely  eliminating  the 
need  for  specialized  banking  institutions  for  this  purpose. 

CATTLE  LOAN  COMPANIES 

Iowa's  corn  crops  have  been  responsible  for  placing  the 
State  among  the  leading  meat  producing  Commonwealths  of 
the  Union.  The  cattle  feeding  industry  has  necessitated  a 
large  amount  of  borrowing  by  farmers  and  stockmen.  For 
the  most  part  the  cattle  paper  in  Iowa  is  handled  by  the 
commercial  banks,  but  there  are  a  few  specialized  institu- 
tions in  the  State  known  as  cattle  loan  companies.  Such 
companies  are  not  peculiar  to  Iowa,  but  may  be  found  in 
other  meat  producing  sections.  Usually  these  are  large 
companies  located  in  the  leading  packing  centers,  prepared 
to  loan  to  the  big  stockmen  and  cattle  feeders. 

During  the  recent  years  Iowa  and  Illinois  have  been  far  in 
the  lead  of  other  States  in  corn  production,  Iowa's  crop 
with  a  five  year  average  (1914-1918)  of  368,200,000  bushels 
being  slightly  in  excess  of  that  of  her  sister  State.^*^  A 
considerable  proportion  of  Iowa's  corn  crop  is  marketed  in 
the  form  of  beef  and  pork.  In  number  of  cattle  on  farms  on 
January  1, 1917,  Iowa  ranked  second  to  Texas,  and  in  num- 
ber of  hogs  had  more  than  double  the  total  of  Illinois,  the 
State  next  to  her.^^^  Many  of  the  cattle  on  Iowa  farms  have 
been  brought  into  the  State  ready  to  go  into  the  last  stage  of 
corn  feeding  prior  to  their  sale  as  finished  beef.  The  cattle 
feeder,  especially  in  the  western  part  of  Iowa,  goes  into  the 
Sioux  City  and  Omaha  markets,  or  directly  to  the  range  and 
pasture  country  farther  west,  where  he  buys  up  mature 
steers,  which  after  from  three  to  six  months  feeding  are 
ready  for  market.  Usually  he  has  corn  and  other  feed  on 
the  farm  sufficient  to  carry  the  cattle  through  to  maturity. 
But  in  most  cases  he  has  to  borrow  the  money  to  purchase 


SPECIAL  TYPES  OF  BANKING  321 

the  feeders;  frequently,  loans  of  one  hundred  per  cent  of 
the  cost  price  are  made.  Cattle  loans  of  this  type  can  be 
classed  as  prime  commercial  paper  because  of  their  safety 
and  their  very  liquid  character.  In  most  cases  the  loans  are 
from  ninety  days  to  six  months.  At  the  expiration  of  that 
time  the  cattle  will  be  marketed  and  the  note  paid.  In  spite 
of  panics  or  wars,  a  cash  market  for  beef  cattle  has  always 
been  maintained  in  the  chief  packing  centers.  According 
to  a  representative  of  John  Clay  and  Company,  a  leading 
commission  firm  engaged  in  marketing  cattle,  ninety-six 
per  cent  of  cattle  loans  were  paid  at  maturity  during  1914, 
when  loans  made  on  stocks  and  bonds  had  to  be  contin- 
ued.^*^ Prices  on  beef  cattle  do  not  fluctuate  widely  over 
short  periods,  and  the  losses  to  the  farmer  from  disease, 
even  during  an  epidemic  such  as  the  foot  and  mouth  disease, 
are  very  small.*^**^  The  losses  sustained  on  cattle  loans  are 
almost  negligible  when  credit  is  extended  judiciously.  The 
Knorpp  Cattle  Loan  Company  of  Kansas  City  has  not  had 
a  loan  become  overdue  in  its  experience  of  several  years. 
Losses  of  the  St.  Joseph  Cattle  Loan  Company  on  over 
$70,000,000  worth  of  loans  amounted  to  only  0.00043  per 
cent;  the  St.  Louis  Cattle  Loan  Company  has  had  an  even 
more  favorable  record.*^*® 

Until  within  the  past  decade  no  specialized  cattle  loaning 
companies  had  been  incorporated  in  Iowa :  local  banks  made 
the  loans  direct,  and  when  the  seasonal  demand  was  heavy 
secured  an  outlet  for  their  excess  paper  through  their  cor- 
respondent banks.  In  1913  the  Sioux  City  Cattle  Loan  Com- 
pany was  organized  in  connection  with  the  Live  Stock  Na- 
tional Bank.*'*^  This  seems  to  have  been  the  pioneer  com- 
pany in  Iowa;  but  by  1919  at  least  four  other  companies 
were  either  operating  or  in  process  of  organization.®^*  The 
loaning  area  of  these  companies  is  not  confined  to  Iowa  but 
includes  Nebraska,  South  Dakota,  Montana,  and  Wyoming. 

The  two  principal  types  of  cattle  loan  companies  are  the 

21 


322  HISTORY   OF   BANKING   IN   IOWA 

independent  companies  and  those  affiliated  with  a  State  or 
national  bank.  An  illustration  of  the  latter  type  is  the 
Sioux  City  Cattle  Loan  Company.  There  are  certain  ad- 
vantages for  a  national  bank  to  have  an  affiliated  cattle  loan 
company  handle  this  class  of  business.  In  the  first  place 
the  legal  limit  which  a  national  bank  may  loan  to  one  indi- 
vidual is  ten  per  cent  of  the  capital  and  surplus.  Loans 
made  by  the  Sioux  City  company  run  from  $1500  to  as 
much  as  $200,000 — many  of  them  larger  than  the  legal  limit 
of  the  affiliated  national  bank.  Moreover,  it  is  not  neces- 
sary to  keep  a  cash  reserve  in  the  cattle  loan  company.  A 
further  advantage  to  the  bank  is  that  it  furnishes  a  con- 
venient source  from  which  to  secure  investment  paper  when- 
ever the  bank  has  surplus  funds ;  at  other  times  the  paper 
can  normally  be  sold  to  outside  investors.  The  benefit  to 
the  allied  cattle  company  is  that  it  lowers  the  cost  of  opera- 
tion when  the  two  institutions  use  the  same  quarters,  and 
the  prestige  of  a  strong  bank  attracts  business. 

The  business  of  the  cattle  loan  companies  is  primarily 
that  of  a  broker  for  this  class  of  notes;  and  the  company 
keeps  on  hand  paper  about  equal  to  its  capital  and  surplus. 
The  Sioux  City  Cattle  Loan  Company  is  capitalized  at 
$200,000.  In  August,  1919,  it  had  outstanding  loans  amount- 
ing to  $3,500,000 ;  at  seasons  when  the  demand  is  heavy  the 
amount  increases.  Loans  of  the  cattle  loan  companies  are 
largely  made  through  the  country  banks  at  rates  current  in 
the  respective  localities.  These  loans  are  secured  by  chattel 
mortgages,  and  the  condition  of  the  cattle  is  checked  up  from 
time  to  time  by  inspectors  working  in  the  loaning  areas. 
Cattle  notes  are  endorsed  by  the  loan  company  and  sold  to 
investors  in  the  financial  centers,  principally  the  large  banks 
in  the  east.  The  rediscount  rate  is  usually  about  two  per 
cent  less  than  that  charged  the  borrower.  The  overhead 
expenses,  reserves  for  losses  and  profits  of  the  company 
are  made  from  this  difference  in  discount  rates,  or  broker- 


SPECIAL  TYPES  OF  BANKING  323 

age.  Large  loans  are  frequently  divided  into  several  notes 
for  easier  marketing.  Collection  is  made  by  the  cattle  loan 
company.^  ^^ 

During  1920  and  the  early  months  of  1921,  the  financial 
conditions  of  the  country  generally  have  be^n  such  as  to 
make  it  difficult  for  cattle  loan  companies  to  operate.  They 
are  limited  by  Iowa  law  to  charging  interest  not  in  excess 
of  eight  per  cent.  Interest  rates  have  been  at  such  a  high 
level  that  no  paper  could  be  marketed  at  a  rate  sufficiently 
below  this  to  allow  the  necessary  '* spread"  to  cover  ex- 
penses of  operation.  Consequently,  activities  have  been 
practically  suspended  for  some  months. 

In  July,  1921,  a  nation-wide  loan  pool  to  provide  facilities 
up  to  $50,000,000  was  announced.  Representatives  of  east- 
ern banks  provided  $25,000,000  and  the  western  bankers  sub- 
scribed an  equal  amount.  Loans  are  to  be  placed  through 
the  cattle  loan  companies  and  through  local  banks.  The 
Iowa  cattle  loan  companies  hope  through  this  agency  to  dis- 
pose of  some  cattle  paper  and  thus  resume  loaning  opera- 
tions. 

In  Iowa  the  economic  service  of  cattle  companies  varies 
largely  with  local  conditions.  Increased  meat  production 
is  very  desirable — not  only  directly  but  indirectly — in  that 
it  aids  general  food  production  through  better  fertility  of 
the  land  when  the  grain  and  rough  feeds  are  fed  on  the 
farm.  The  interests  of  the  cattle  feeder  and  his  family  are 
broader  than  those  of  the  exclusive  grain  farmer.  Trips  to 
the  markets  to  buy  feeders  and  to  Chicago  or  other  packing 
centers  with  the  fat  cattle  as  they  go  to  market  give  the 
stock  farmer  valuable  contacts  with  outside  commercial  life. 
The  farmer  who  feeds  cattle  has  year  round  employment 
instead  of  spending  his  winter  months  in  wasteful  loafing. 
Any  institution,  therefore,  which  promotes  the  production 
of  sheep  and  cattle  renders  the  community  an  economic 
service. 


324  HISTORY   OF    BANKING   IN   IOWA 

But  whether  or  not  these  companies  are  necessary  to 
handle  the  feeder  loans  in  Iowa  depends  upon  the  alertness 
of  the  local  bankers.  In  1898  G.  L.  Tremain  gave  an  ad- 
dress before  the  Iowa  Bankers  Association  on  "Cattle 
Paper ' '.  He  explained  the  advantages  of  cattle  as  security, 
and  asserted  that  financial  journals  and  capitalists  were 
just  waking  up  to  the  merits  of  the  same.  He  stated  that 
he  had  been  loaning  money  from  his  bank  at  Humboldt  on 
cattle  paper  for  twenty  years  without  loss.  His  security 
was  always  a  chattel  mortgage  or  bill  of  sale.  Within  Mr. 
Tremain 's  recollection  of  events  in  Iowa,  cattle  were  con- 
sidered such  poor  security  for  a  loan  that ' '  a  man  could  not 
borrow  $20  on  all  the  cattle  in  this  county  ".^''*^ 

Ida  County  furnishes  an  illustration  of  what  can  be  done 
toward  financing  the  live  stock  industry  locally  when  the 
bankers  are  alert.  This  is  one  of  the  smaller  counties  of 
the  State  with  only  five  towns,  the  largest  of  which  in  1915 
had  a  population  of  only  a  little  over  2000.*'^^  From  Janu- 
ary 1  to  May  15, 1918,  the  feeders  of  Ida  County  shipped  to 
the  various  markets  about  1300  carloads  of  fat  stock  valued 
at  fully  $2,500,000.  All  of  this  business  was  handled  by  the 
local  banks  which  cater  to  the  livestock  business.  In  that 
community  chattel  mortgages  are  not  taken  on  cattle  except 
from  an  inexperienced  tenant,  or  some  one  who  is  rather 
badly  involved  financially.  Most  of  the  real  cattle  paper 
does  not  run  over  120  days  and  is,  therefore,  available  for 
rediscount  in  the  Federal  Reserve  Bank.^^^  When  these 
banks  have  encountered  difficulties  in  connection  with  the 
statutory  limits  on  loans  of  ten  or  twenty  per  cent  of  the 
capital  and  surplus  to  one  individual  they  have  found  an 
outlet  for  the  excess  paper  through  their  correspondents. 
The  statements  of  condition  of  three  savings  banks  in  the 
town  of  Battle  Creek  (population  688  in  1915)  for  June  29, 
1918,  show  aggregate  loans  of  approximately  $1,500,000. 
This,  however,  is  the  season  when  cattle  loans  would  be  at 


SPECIAL  TYPES  OF  BANKING  325 

a  minimum.*'''*^  Here  the  bankers  have  learned  the  advant- 
age of  financing  the  cattle  industry  and  have  profited 
thereby. 

There  are  other  communities  of  the  State,  however,  where 
cattle  loans  are  still  frowned  upon  by  local  banks.  In  a 
town  near  Battle  Creek,  a  banker  recently  reported  that  he 
had  only  $80,000  in  local  loans  while  he  was  carrying  over 
$200,000  in  outside  paper.^^'^  In  such  a  community  cattle 
feeding  might  be  promoted  by  improved  credit  conditions 
supplied  by  a  cattle  loan  company.  Another  service  of 
these  Iowa  companies  consists  in  making  stock  loans  in  the 
States  of  the  range  and  pasture  area.  The  Sioux  City  Cat- 
tle Loan  Company  loans  to  stockmen  of  South  Dakota, 
northern  Nebraska,  and  some  portions  of  Montana  and 
Wyoming,  on  sheep  as  well  as  cattle.^^^  This  territory  is 
tributary  to  Sioux  City  and  may  legitimately  look  to  her 
banks  for  capital  to  develop  the  livestock  industry.  Other 
Iowa  companies  also  may  find  their  field  of  operation  in  part 
outside  the  State.  In  this  outside  field  they  must  meet  the 
competition  of  numerous  other  companies,  the  number  of 
which  has  been  increasing  rapidly  in  recent  years.  With 
the  large  volume  of  feeder  loans  in  Iowa  and  a  share  of  the 
stocker  loans  in  adjacent  States,  Iowa  companies  should  be 
able  to  employ  considerable  capital  profitably. 

INVESTMENT  BANKING 

Although  investment  banks  are  among  the  prominent 
banking  institutions  in  the  financial  centers,  they  have  not 
developed  to  such  an  important  place  in  Iowa.  Until  quite 
recently  there  has  been  little  surplus  capital  within  the 
State  for  investment  in  bonds  or  other  securities.  There 
has  been,  however,  a  place  for  institutions  equipped  to  buy 
and  sell  the  bonds  of  cities,  counties,  and  school  districts. 
In  part  these  securities  have  been  bought  by  investment 
banking  houses  outside  of  Iowa,  chiefly  those  located  in 


326  HISTORY   OF    BANKING   IN   IOWA 

Chicago.  The  greater  part  of  the  municipal  issues  in  Iowa, 
however,  are  now  financed  by  Iowa  investment  institu- 
tions.^^^ 

Iowa  has  had  practically  no  funded  State  debt,  the  amount 
in  1913  being  only  $10,937.  But  the  indebtedness  of  the 
counties  and  minor  civil  divisions  has  been  considerable  and 
is  rapidly  increasing  in  recent  years.  In  1880  the  total 
amount,  less  sinking  fund  assets,  was  $7,592,332;  in  1890 
it  was  $11,025,384;  in  1902  it  had  increased  to  $17,390,375; 
and  during  the  following  decade  it  more  than  doubled,  total- 
ling $35,069,386  at  the  time  of  the  Federal  census  report  on 
wealth,  debt,  and  taxation  in  1913.  The  distribution  of  this 
between  the  civil  divisions  was  twenty-seven  and  three- 
tenths  per  cent  county,  sixty-three  and  one-tenth  per  cent 
municipal,  and  nine  and  six-tenths  per  cent  independent 
school  districts.  As  to  the  county  indebtedness  the  major 
portion  was  for  drainage  and  road  bonds.  The  percentage 
devoted  to  school  purposes  was  considerably  more  than  the 
nine  and  six-tenths  per  cent  separately  reported,  for  the 
obligation  in  cities  over  2500  on  account  of  schools  was  in- 
cluded in  the  city  debt.^^'^ 

The  oldest  and  best  known  investment  banking  institution 
in  Iowa  is  George  M.  Bechtel  and  Company  of  Davenport, 
with  offices  also  in  Chicago,  and  New  York.  This  company 
was  organized  in  1891,  and  since  that  time  has  financed  im- 
provements in  practically  every  municipality  and  school  dis- 
trict of  lowa.^^^  Schanke  and  Company,  investment  bank- 
ers of  Mason  City,  have  operated  in  Iowa  since  about  1900, 
and  appear  to  have  been  the  second  of  the  well-recognized 
institutions  to  be  established.^^^  It  is  impossible  to  deter- 
mine accurately  the  number  of  the  Iowa  companies  and  their 
volume  of  business.  Some  companies  devoting  a  part  or  all 
of  their  time  to  the  purchase  and  sale  of  securities  have 
adopted  the  title  ' '  Investment  Bankers ' '  and  can  be  identi- 
fied as  such.     Among  the  larger  companies  some  are  incor- 


SPECIAL  TYPES  OF  BANKING  327 

porated  under  Iowa  law  and  others  are  unincorporated. 
The  investment  houses  do  not  accept  deposits  and,  there- 
fore, do  not  come  under  the  general  banking  laws  of  Iowa  or 
the  supervision  of  the  State  Department  of  Banking.  Under 
the  circumstances  definite  data  regarding  investment  bank- 
ing are  very  difficult  to  obtain."^""  In  1919  the  Iowa  legisla- 
ture passed  a  bill  which,  while  aimed  primarily  at  private 
commercial  banks,  was  so  framed  as  to  prohibit  any  institu- 
tion not  under  national  or  State  supervision  from  using  the 
word  banker,  or  any  derivative  thereof,  in  its  title.^**^  This 
does  not  apply  to  banks  already  established,  but  will  cut  off 
any  new  investment  institutions  from  the  right  to  use  the 
name  "investment  banker ".^"^ 

Securities  handled  by  the  Iowa  investment  banks  consist 
largely  of  government  and  municipal  bonds  of  various 
classes.  Corporation  securities  are  handled  in  only  a  lim- 
ited way.  None  of  the  companies  from  whom  reports  were 
secured  are  members  of  any  stock  exchange.'^*^^  The  officers 
of  one  company  report  that  they  supply  customers  with 
securities  listed  on  any  of  the  exchanges  if  they  desire. 
Usually  bonds  are  bought  outright  and  disposed  of  later. 
Some  of  the  companies  handle  bond  issues  on  a  commission 
basis  or  serve  as  correspondents  of  other  investment  com- 
panies. Sales  are  made  to  private  investors,  banks,  en- 
dowed institutions,  and  other  bond  houses.  Private  invest- 
ors appear  to  be  the  largest  purchasers.  The  selling  terri- 
tory of  the  older  companies  is  from  coast  to  coast,  one  com- 
pany reports  a  large  clientele  in  California.'^"'* 

In  addition  to  institutions  carrying  on  the  business  of  in- 
vestment banking,  as  it  is  commonly  understood,  some  in- 
dividuals or  companies  handling  loans,  insurance,  or  real 
estate  have  taken  the  title  ''Investment  Bankers"  for  the 
sake  of  the  prestige  that  they  secure  in  this  way.'^'^^  It  is 
not  uncommon  either  for  the  larger  companies  to  broaden 
the  range  of  their  business  somewhat  by  dealing  in  farm 


328  HISTORY   OF    BANKING   IN   IOWA 

mortgages,  acting  as  note  brokers,  guaranteeing  titles,  or 
engaging  in  other  side  issues.  The  term  investment  banker, 
therefore,  does  not  have  a  standard  meaning  in  Iowa  and 
the  number  of  firms  doing  strictly  investment  business  is 
very  limited. 

Efforts  to  secure  estimates  as  to  the  volume  of  business 
handled  by  the  Iowa  companies  have  been  unsuccessful. 
Geo.  M.  Bechtel  and  Company  report  annual  investments  of 
from  twelve  to  fifteen  million  dollars.  Schanke  and  Com- 
pany's sales  were  estimated  at  about  ten  millions,  but  this 
includes  a  large  volume  of  farm  mortgage  business.  At  the 
end  of  the  first  year  of  business  the  Bankers  Mortgage  Com- 
pany of  Des  Moines  had  done  a  little  over  six  million  dol- 
lars of  business  and  had  expectations  of  greatly  enlarging 
this  as  the  sales  force  increased.'^"*'  It  is  clear  that  the  total 
volume  of  sales  of  bonds  and  securities  is  considerable  in 
the  aggregate.  The  highway  law,  enacted  in  1919,  permits 
the  counties  of  Iowa  to  issue  bonds  in  order  to  pave  the 
primary  road  system  of  the  State.'^'^^  Of  the  fourteen  coun- 
ties which  first  voted  to  accept  Federal  aid  for  hard  sur- 
facing the  primary  roads,  six  authorized  bond  issues  to 
carry  on  the  work  at  a  faster  rate  than  provided  for  by  cur- 
rent receipts  from  the  annual  primary  fund  allotment.  Bond 
issues  authorized  in  these  six  counties  aggregated  $10,- 
250,000.'^"^  The  extent  to  which  other  low^a  counties  will 
vote  bond  issues  for  this  purpose  can  not  be  determined 
until  all  the  special  elections  for  this  purpose  have  been 
held.  Doubtless  road  building  and  other  public  improve- 
ments will  greatly  increase  the  total  indebtedness  of  the 
counties  and  other  minor  civil  divisions  of  Iowa  in  the 
future.  The  volume  of  business  of  the  investment  banks 
will  be  correspondingly  increased.  A  large  market  is  also 
developing  in  Iowa  for  corporate  securities.  Investment 
banks  will  serve  the  needs  of  clients  for  this  class  of  invest- 
ments.    Indeed,  it  seems  that  investment  banking,  carried 


SPECIAL  TYPES  OF  BANKING  329 

on  either  by  separate  institutions  or  as  a  department  of  com- 
mercial banking,  will  have  an  increasing  field  in  Iowa. 

POSTAL  SAVINGS  BANKS 

One  further  type  of  banking  carried  on  in  Iowa  is  that 
conducted  through  the  postal  savings  banks.  The  postal 
savings  bank  system  is  not  a  product  of  Iowa  law,  nor  is  it 
peculiar  to  this  State.  Ordinarily  postal  savings  banks  are 
not  numbered  among  Iowa's  banking  institutions;  never- 
theless, in  a  study  of  this  kind  it  seems  advisable  to  devote 
some  attention  to  the  system.  Its  history  in  Iowa  can  not 
be  considered,  however,  apart  from  the  national  movement. 
For  this  reason  it  will  be  necessary  to  outline  very  briefly 
the  postal  savings  bank  system  as  a  whole,  but  wherever 
possible  with  special  reference  to  Iowa  conditions.  In  so 
far  as  they  can  be  obtained,  statistics  of  the  number  of  de- 
positors and  the  volume  of  savings  within  the  State  will 
also  be  presented. 

As  a  result  of  the  panic  of  1907  the  Republican  party  in 
the  presidential  campaign  of  1908  went  before  the  country 
in  support  of  postal  savings.  The  opposing  plank  in  the 
Democratic  party  platform  was  one  for  a  system  of  guar- 
antee of  deposits  in  all  banks.  Depositors  had  become 
frightened  during  the  panic  and  popular  distrust  of  banks 
continued  so  strong  as  to  induce  both  political  parties  to 
support  some  measure  offering  relief  for  the  timid  de- 
positor. Forty  years  of  agitation,  during  which  time  scores 
of  bills  for  the  establishment  of  postal  savings  banks  had 
been  introduced  into  Congress,  had  failed  to  win  support 
enough  for  such  a  measure  to  secure  its  enactment  into  law. 
Nor  can  the  Republican  victory  of  1908  be  interpreted  as 
evidence  of  a  strong  demand  for  postal  savings  banks.  But 
in  order  to  redeem  the  party  pledge,  the  Republican  ma- 
jority in  Congress  secured  the  passage  of  a  bill  creating  the 
postal  savings  bank  system,  which  was  approved  by  Presi- 
dent Taft  on  June  25,  1910.'«» 


330  HISTORY   OF    BANKING   IN   IOWA 

In  Iowa  there  had  been  very  little  demand  for  postal  sav- 
ings banks.  Losses  due  to  bank  failures  during  the  panic 
had  been  nominal,  and  in  most  parts  of  the  State  there  had 
been  no  suspension  of  payments  by  the  banks.  Banks  were 
easily  accessible  in  all  sections  of  the  State,  and  in  indus- 
trial cities  they  were  opened  Saturday  evenings  to  cash  pay 
checks  and  receive  deposits.  Bankers  in  Iowa  generally 
were  opposed  to  the  system,  fearing  that  it  would  withdraw 
money  from  the  regular  savings  accounts.  Moreover,  there 
was  a  fear  that  funds  collected  in  Iowa  would  be  withdrawn 
from  the  State  for  the  purchase  of  government  bonds  or  for 
deposit  with  the  general  treasury  funds.  It  was  also  feared 
that  the  presence  of  postal  savings  banks  would  encourage 
timid  depositors  to  withdraw  their  funds  from  banks  in 
times  of  financial  stress  to  deposit  at  the  post  office. 

As  a  matter  of  fact  the  gloomy  outcome  feared  by  oppon- 
ents of  the  measure  has  not  been  experienced.  There  is 
no  evidence  that  postal  savings  banks  have  been  competitors 
of  the  savings  banks.  The  low  interest  rate  of  two  per  cent 
paid  on  deposits  has  not  been  sufficient  to  induce  depositors 
to  withdraw  their  money  from  the  banks,  since  the  latter  pay 
interest  of  four  per  cent  in  most  Iowa  cities.  The  postal 
savings  bank  act  of  1910  limited  an  individual's  deposits  to 
$100  in  any  calendar  month  and  to  $500  as  a  total,  exclusive 
of  accumulated  interest.  These  restrictions  were  expected 
to  confine  the  use  of  the  system  to  small  depositors  and  also 
to  protect  banks  against  withdrawals  of  heavy  sums  in  time 
of  panic.  After  six  years  of  experience  the  $100  monthly 
limit  on  deposits  was  removed  entirely  by  an  act  approved 
on  May  18,  1916.  At  the  same  time  the  maximum  amount 
which  any  depositor  might  have  to  his  credit  was  raised 
from  $500  to  $1000  with  the  privilege  of  an  additional  $1000 
without  interest. '^^'^ 

Provision  was  made  for  the  redeposit  of  the  money  re- 
ceived in  postal  savings  accounts  in  the  local  banks.     After 


SPECIAL  TYPES  OF  BANKING  331 

1914  member  banks  of  the  Federal  reserve  system  were 
given  preference  as  depository  banks,  but  the  list  still  in- 
cludes many  non-member  banks.  On  June  30,  1917,  postal 
savings  funds  were  held  by  3486  national  banks,  1274  State 
banks,  242  savings  banks,  568  trust  companies,  and  thirteen 
'^organized"  private  banks.'^^^  Funds  so  deposited  are 
secured  by  approved  bonds  of  the  United  States,  States, 
municipalities  or  counties,  and  farm  loan  bonds.  Bonds  to 
the  amount  of  $189,842,746  were  held  by  the  United  States 
Treasurer  on  June  30,  1918,  as  security  for  postal  savings 
funds  deposited  in  the  banks. '^^^  As  a  matter  of  fact,  the 
banks  have  not  lost  savings  accounts  owing  to  the  competi- 
tion of  the  postal  savings  system,  but  through  the  system 
have  received  the  use  of  money  at  a  lower  rate  than  they 
are  in  the  habit  of  paying. 

The  records  show  that  the  total  deposits  in  the  postal 
savings  banks  of  the  United  States  on  June  30,  1916,  were 
$86,019,885.  Deposits  a  year  later  were  $131,954,696,  an 
increase  for  the  year  of  fifty-three  and  four-tenths  per 
cent.'^^^  The  competition  of  the  war  savings  stamps,  which 
were  also  sold  at  the  post  offices,  and  the  demands  upon  all 
classes  to  buy  Liberty  bonds  reduced  the  percentage  of  in- 
crease during  the  following  year  to  about  twelve  per  cent. 
The  total  deposits  on  June  30,  1918,  were  $148,471,499 ;  on 
June  30,  1919,  the  total  was  $167,323,260.'^i*  The  only 
available  statistics  for  Iowa  compiled  separately  are  as  of 
June  30, 1916.  There  were  then  in  Iowa  268  postal  savings 
banks,  3155  depositors,  and  total  deposits  of  $527,000.  Iowa 
was  far  below  the  average  of  the  States  in  the  per  capita 
deposits.  The  general  average  for  the  United  States  was 
eighty-three  cents  per  capita;  in  Iowa  it  was  twenty-four 
cents.  Taking  the  country  as  a  whole,  there  was  one  de- 
positor for  each  172  persons ;  in  Iowa  there  was  only  one  in 
705.'^! « 

An  analysis  of  the  postal  savings  statistics  explains  these 


332  HISTORY    OF    BANKING    IN    IOWA 

facts.  The  cities  and  towns  having  large  per  capita  de- 
posits are  industrial  communities,  the  depositors  being 
largely  those  who  work  for  a  daily  wage.  To  them  the  post 
office  is  a  familiar  place,  its  hours  are  convenient,  and  they 
have  confidence  in  its  security.  The  foreign-born  popula- 
tion is  especially  attracted  to  the  post  office  as  a  savings 
bank.'^^  They  have  been  accustomed  to  the  postal  savings 
banks  in  the  land  of  their  birth  and  have  frequently  been 
exploited  by  immigrant  banks  upon  arrival  in  America.  In 
1916  sixty  per  cent  of  the  depositors  were  foreign  born,  and 
this  sixty  per  cent  owned  three-fourths  of  all  the  deposits.^^''^ 
In  Iowa  there  are  few  industrial  centers,  and  here  the  regu- 
lar savings  banks  have  appealed  especially  to  the  foreign 
born.  In  the  cities  which  possess  a  dominant  foreign  ele- 
ment, the  banks  issue  advertising  in  the  language  of  the  im- 
migrants, employ  clerks  who  can  talk  with  them  in  their  ow^n 
tongue,  and  in  other  ways  seek  to  make  them  regular  cus- 
tomers of  the  banks.  The  splendid  record  of  safety  of  the 
Iowa  banks  has  also  doubtless  contributed  to  inspiring  con- 
fidence in  the  banks,  while  the  disgraceful  "immigrant 
bank"  is  almost,  if  not  quite,  unknown  in  this  State.  The 
reasons  which  have  accounted  for  the  failure  of  postal  sav- 
ings banks  to  make  considerable  inroads  into  the  business 
of  the  banks  of  Iowa  seem  certain  to  be  of  equal  importance 
in  the  future. 


XIV 

BANKS  AND  THE  COMMUNITY 

The  relations  of  the  banks  of  Iowa  to  the  communities  in 
which  they  are  located  do  not  differ  materially  from  those 
of  neighboring  States.  A  discussion  of  the  economic  func- 
tions and  services  of  banks  in  the  community  will,  therefore, 
necessarily  include  much  that  is  commonplace  to  the  experi- 
enced banker  or  close  student  of  banking  theory  and  prac- 
tice. Nevertheless,  for  the  sake  of  the  general  reader,  the 
author  regards  it  as  desirable  to  undertake  a  classification 
of  banking  functions  with  special  reference  to  the  business 
and  economic  conditions  of  Iowa.  This  chapter  will  include 
an  analysis  of  the  banking  functions,  a  summary  of  some 
of  the  community  services  of  the  banks,  an  account  of  the 
effect  of  increasing  community  service  upon  the  popular 
attitude  toward  banks,  an  explanation  of  the  unusual  num- 
ber of  banks  in  Iowa,  an  estimate  as  to  the  distribution  of 
ownership  of  the  banking  institutions,  a  partial  record  of 
the  profits  received  by  banks  for  the  services  rendered,  and 
a  statement  of  the  methods  used  in  attracting  additional 
business.  The  discussion  will  be  confined  primarily  to  the 
functions  of  the  general  or  commercial  banks.  The  place  of 
specialized  institutions  has  been  covered  in  the  chapters 
devoted  to  these  types  of  banking. 

PRIMAEY  BANKING  FUNCTIONS 

The  essential  functions  of  the  commercial  bank  are  ordi- 
narily considered  to  be  three — discount,  deposit,  and  is- 
sue.'^^*  Of  these  the  first  two  are  indispensable  for  any 
bank;  the  third,  when  narrowly  limited  to  note  issue  is  no 
longer  regarded  as  equally  important.  Added  to  these  pri- 
mary functions  are  certain  secondary  features  which  are 

333 


334  HISTORY   OF   BANKING   IN   IOWA 

also  quite  important  in  general  banking.  Among  these  may 
be  mentioned:  providing  domestic  and  foreign  exchange, 
facilitating  investments,  serving  in  a  fiduciary  capacity,  and 
engaging  in  a  safety  deposit  business.  In  addition  to  these 
banking  functions  the  banks  perform  many  important  busi- 
ness functions  and  general  community  services. 

Receiving  Deposits: — The  first  service  which  a  bank  ren- 
ders to  most  individuals  is  that  of  receiving  money  on  de- 
posit. This  may  begin  at  a  very  early  age  in  the  individ- 
ual's life.  Through  school  saving  clubs,  Christmas  clubs, 
and  other  means  the  number  of  children  using  the  banks  as 
a  place  for  the  safe  deposit  of  money  has  become  consider- 
able. Many  adults  also  use  the  banks  chiefly  as  a  place  of 
deposit  of  money,  either  in  a  savings  account  or  a  current 
checking  account.  In  providing  a  safe  place  for  the  deposit 
of  money  the  banks  stimulate  productive  saving  and  prevent 
hoarding.  The  bank  serves  as  the  financial  middleman  be- 
tween saver  and  borrower,  thus  directly  aiding  production. 
Small  rills  of  saving  are  brought  together  which  in  the  ag- 
gregate add  enormously  to  the  productive  power  of  society. 

It  is  not  possible  to  state  the  exact  amount  of  total  de- 
posits of  Iowa  banks  because  of  the  failure  to  secure  reports 
from  the  private  banks.  On  December  31, 1919,  the  deposits 
in  savings  banks.  State  banks,  and  trust  companies  aggre- 
gated $654,253,531.'^i»  In  October,  1919,  the  national  banks 
reported  deposits  of  $258,277,000.  It  is  safe  to  assume  that 
if  the  deposits  of  private  banks  had  been  included  the  total 
deposits  in  Iowa  banks  at  the  close  of  1919  would  have  been 
approximately  $1,000,000,000.  A  much  higher  figure  was 
reached  in  1920  but  by  the  summer  of  1921  all  of  this  ad- 
vance had  been  lost  and  the  figure  reduced  even  below  the 
1919  amount.  The  reports  do  not  show  totals  of  savings 
deposits  separately  but  this  class  constitutes  a  large  pro- 
portion in  the  country  banks  of  Iowa.     National  banks  paid 


BANKS  AND  THE  COMMUNITY  335 

a  total  of  $6,616,000  in  interest  upon  their  deposits  in 
1919J^®  In  a  western  Iowa  town  of  approximately  700 
population,  three  savings  banks  reported  deposits  of  $1,- 
844,727  on  June  30, 1920.  Of  these  deposits  over  $1,250,000 
were  in  time  certificates  of  deposit  and  savings  accounts.''^^ 

The  stimuli  which  banks  offer  to  the  saver  are  safety  of 
the  principal  and  a  return  in  the  form  of  interest.  In  re- 
spect to  the  former,  Iowa  banks  have  been  shown  to  have 
an  enviable  record.  No  absolute  guarantee  is  given  the 
depositor,  but  careful  supervision  of  banking  is  exercised 
primarily  on  his  behalf. "^^2  rpj^g  result  is  that  very  little 
hoarding  occurs  in  the  State  and  little  anxiety  is  shown  for 
the  safety  of  the  bank  deposits. 

Interest  rates  paid  on  savings  accounts  in  Iowa  banks  are 
from  three  and  one-half  to  five  per  cent,  the  prevailing  rate 
in  most  Iowa  towns  being  four  per  cent.  In  western  Iowa 
a  considerable  number  of  country  banks  pay  five  per  cent 
on  time  deposits.  The  Federal  Comptroller  has  under- 
taken in  some  years  to  ascertain  the  average  rates  paid  on 
time  deposits  by  all  banks.  His  records  for  1909  show  that 
all  reporting  banks  in  Iowa  averaged  3.95  per  cent.  By 
classes  these  were:  national  banks  3.88  per  cent,  savings 
banks  3.67  per  cent,  State  banks  4.01  per  cent,  private  banks 
4.01  per  cent,  and  loan  and  trust  companies  4.00  per  cent 
In  1915  the  average  rates  were  somewhat  higher,  ranging 
from  4.10  per  cent  for  the  savings  banks  to  4.25  per  cent  for 
private  banks  and  trust  companies.  In  both  cases  these 
reports  are  unofficial  and  incomplete,  but  they  represent  a 
large  number  of  banks  and  are  therefore  about  as  satisfac- 
tory as  can  be  obtained.'^^^ 

Most  Iowa  banks  do  not  pay  interest  on  individual  check- 
ing accounts.  Banks  in  the  reserve  cities  allow  interest  on 
the  daily  balances  of  the  reserve  accounts  of  correspondent 
banks.  The  State  law  also  specifies  that  interest  of  at  least 
two  and  one-half  per  cent  per  annum  on  ninety  per  cent  of 


336  HISTORY    OF    BANKING    IN    IOWA 

the  daily  balance  must  be  paid  on  certain  public  funds  de- 
posited in  the  banks."^^  It  appears,  however,  that  this  re- 
quirement is  not  rigidly  enforced  by  the  minor  political 
units,  where  the  balance  is  so  small  as  to  make  the  interest 
almost  negligible. 

Charges  are  made  in  a  few  Iowa  cities  for  handling  small 
checking  accounts.  The  rule  is  to  impose  the  service  charge 
on  all  accounts  having  an  average  balance  below  a  certain 
fixed  minimum,  usually  about  $100.  This  practice  appears 
to  be  confined  to  a  limited  number  of  cities,  principally 
those  designated  as  reserve  centers. '^^^  Because  of  the  en- 
couragement which  they  have  always  felt  should  be  given 
to  the  small  depositor,  many  bankers  deem  it  inexpedient  at 
the  present  time  to  impose  a  service  charge  even  on  accounts 
which  are  known  to  be  unprofitable.  They  regard  the  stimu- 
lation of  deposit  banking  as  one  of  the  services  which  they 
owe  to  the  community.  Moreover,  the  bank  recognizes 
many  potential  profits  in  accounts  now^  too  small  to  be  profit- 
able. It  seems  unlikely,  therefore,  that  Iowa  banks  will 
generally  adopt  the  practice  of  making  service  charges. 

Issue  of  Circulating  Media: — In  the  early  days  of  Iowa 
banking  the  issue  of  bank  notes  was  a  very  important  bank- 
ing function.  It  was  the  abuse  of  this  privilege  that  caused 
the  extreme  prejudice  against  banks  manifested  in  the  mid- 
nineteenth  century.  Later  most  of  the  regulation  of  bank- 
ing was  devised  for  the  protection  of  the  note  holder.  At 
present  State  banks  do  not  issue  any  notes.  National  banks 
continue  to  issue  notes  and  all  member  banks  of  the  Federal 
reserve  system  play  a  part  in  bringing  into  existence  the 
Federal  reserve  notes. "^^"^  On  the  whole,  however,  the  note- 
issuing  function  has  become  of  subordinate  importance  in 
commercial  banks  during  the  past  half  century. 

The  chief  form  of  circulating  medium  furnished  by  banks 
to-day  is  deposit  or  check  currency.  Banks  receive  deposits 


BANKS  AND  THE  COMMUNITY  337 

of  money  and  also  create  deposits  by  making  loans ;  all  such 
deposits  may  be  transferred  by  means  of  checks.  In  1909 
Professor  David  Kinley,  investigating  for  the  National 
Monetary  Commission,  found  that  approximately  ninety  per 
cent  of  all  payments  in  the  United  States  are  made  by 
checks.'^^^  It  has  been  commonly  stated  by  writers  on  eco- 
nomics and  finance  that  bank  notes  and  specie  are  still  used 
very  extensively  in  the  rural  sections  of  the  country.  This 
situation  certainly  does  not  exist  in  Iowa  at  the  present  time, 
although  it  seems  to  have  been  true  a  generation  ago. 

The  writer 's  boyhood  was  spent  on  a  western  Iowa  farm 
and  his  first  memories  date  back  to  the  mid-nineties.  In 
those  days  the  farmer  made  most  of  his  payments  in  coin  or 
bills,  the  silver  dollar  being  an  important  element  of  the 
medium  of  exchange,  since  bills  of  less  than  $5  were  prac- 
tically unknown.  What  a  cause  for  wonder  and  amazement 
to  the  small  boy  was  the  leather  wallet  and  its  contents  car- 
ried by  the  farmer-manager  of  the  neighborhood  threshing 
outfit!  Into  its  greasy  depths  went  the  money  collected 
from  the  farmers  to  settle  the  threshing  bill.  A  peep  at  its 
contents  was  enough  to  convince  us  youngsters  that  it  con- 
tained fabulous  sums  of  real  money.  To-day  the  collections 
for  a  similar  outfit  consist  almost  entirely  of  checks  on  the 
local  banks.  A  banker  of  that  community  canvassed  the 
situation  in  1919  and  could  not  find  a  farmer  in  the  town- 
ship who  did  not  have  a  banking  connection.  He  expressed 
the  opinion  that  not  a  farmer  in  the  county  would  be  found 
who  did  not  call  some  bank  "his  bank". 

Iowa  farmers  issue  checks  large  and  small  in  payment  of 
local  bills  or  for  the  settlement  of  out-of-town  obligations. 
Through  their  correspondent  banks  or  through  the  facilities 
afforded  by  the  clearing  system  of  the  Federal  reserve 
banks,  Iowa  banks  have  made  their  customers '  checks  read- 
ily acceptable  at  par  in  all  domestic  payments. 

In  furnishing  the  three  forms  of  media  of  exchange — 

22 


338  HISTORY    OF   BANKING   IN   IOWA 

national  bank  notes,  Federal  reserve  notes,  and  deposit  cur- 
rency— the  banks  make  it  possible  to  transact  an  enormous 
amount  of  business  with  a  relatively  small  amount  of  actual 
specie.  The  use  of  gold  and  silver,  chiefly  the  former,  is 
thus  greatly  economized.  Moreover,  bank  notes  and  checks 
are  more  convenient  for  the  user.  By  a  few  strokes  of  the 
pen  a  check  can  be  issued  in  any  amount.  Since  it  passes 
only  by  endorsement  it  is  relatively  more  safe  as  well  as 
more  convenient  than  coin. 

Discounting  Commercial  Paper: — The  discounting  of 
commercial  paper  or  making  loans  is  perhaps  the  most  diffi- 
cult and  important  of  a  bank's  various  functions.  A 
modern  bank  has  been  quite  aptly  described  by  one  author- 
ity as  a  ''manufactory  of  credit ".'^^^  It  is  sometimes  as- 
sumed that  a  bank  merely  loans  the  money  paid  in  by  its 
stockholders  and  received  from  depositors.  As  a  matter  of 
fact  only  a  portion  of  the  credit,  which  the  bank  issues  to 
borrowers  either  as  notes  or  deposit  credits,  is  obtained  in 
this  manner.  The  bank  "manufactures"  credit  by  the 
process  of  discounting  commercial  paper.  Business  credit 
is  not  available  in  liquid  form,  but  bank  credit  which  may 
circulate  in  the  form  of  deposit  currency  is  widely  accept- 
able. An  important  function  of  banking  is,  therefore,  to 
loan  its  credit  to  producers  in  the  community  pending  the 
sale  of  products  or  the  realization  of  cash  upon  contracts. 
In  so  doing  it ' '  creates ' '  deposits  amounting  to  many  times 
the  actual  specie  of  the  community. 

An  illustration  of  how  the  bank  creates  deposit  credits 
by  its  loaning  process  will  simplify  the  explanation.  A 
borrower  seeks  a  discount  at  the  bank  for  a  $1000  note.  Or- 
dinarily the  bank,  if  willing  to  extend  the  loan,  will  deduct 
the  interest  and  credit  the  borrower  with  the  balance  (say 
$980)  of  the  amount.  This  credit  is  a  deposit  which  may  be 
drawn  at  the  pleasure  of  the  borrower.     He  may  withdraw 


BANKS  AND  THE  COMMUNITY  389 

the  entire  amount  at  once  but  seldom,  however,  would  this 
be  the  case.  Usually  the  borrower  transfers  his  credit  by 
means  of  a  check  to  some  other  person  to  whom  he  has  a 
payment  to  make.  He  in  turn  may  either  deposit  it  in  the 
bank  or  convert  it  into  cash  as  suits  his  convenience.  Nor- 
mally large  transactions  of  this  kind  may  take  place  with- 
out the  intervention  of  any  actual  money. 

In  order  to  be  able  to  meet  the  probable  demands  of  his 
depositors,  however,  the  banker  must  keep  on  hand  a  certain 
amount  of  cash.  This  amount  is  called  the  reserve  and  is 
proportionate  to  the  deposits.  The  right  proportion  to 
maintain  will  vary  with  seasonal  and  local  conditions  and 
can  only  be  learned  by  experience.  State  law  in  Iowa  fixes 
minimum  limits  upon  the  amount  of  such  reserves — fifteen 
to  twenty  per  cent  against  demand  deposits  depending  upon 
the  size  of  the  city — but  in  this  matter  legal  requirements 
can  not  be  substituted  for  sound  business  judgment.  A  cash 
reserve  large  enough  to  meet  all  probable  needs,  under  vary- 
ing credit  conditions,  and  yet  not  so  large  as  to  reduce  the 
possibility  of  making  legitimate  profits  for  the  bank  is  the 
goal  of  the  prudent  banker. 

Loans  may  be  made  by  discounting  notes,  drafts,  or  accep- 
tances bearing  the  endorsement  of  the  manufacturer  or 
wholesaler.  In  recent  years  an  effort  has  been  made  by  the 
Iowa  bankers  to  promote  the  use  of  trade  acceptances.  A 
committee  on  trade  acceptances  was  appointed  by  the  Iowa 
Bankers  Association  to  represent  Iowa  on  the  American 
Trade  Acceptance  Council  in  1917-1918.  At  the  1918  con- 
vention of  the  State  Association  a  resolution  was  passed 
endorsing  trade  acceptances  and  urging  bankers  and  trade 
organizations  to  bring  about  their  general  use.'^^'^  It  still 
remains  true,  however,  that  most  of  the  country  banks  of 
Iowa  loan  on  single-name  promissory  notes. 

The  prevailing  type  of  loans  will  depend  upon  local  con- 
ditions.    Since  Iowa  is  predominately  an  agricultural  State 


340  HISTORY   OF    BANKING   IN   IOWA 

the  valuable  business  is  that  of  the  farmers  in  all  but  the 
few  larger  cities  of  the  State.  This  appears  to  be  increas- 
ingly the  case.  An  experienced  banker  states  that  during 
his  connection  with  the  banking  business  a  marked  change 
has  taken  place  in  the  relative  position  of  the  farmer  bor- 
rower. Fifteen  or  twenty  years  ago  the  town  merchant  was 
looked  upon  as  the  desirable  customer  whose  line  of  credit 
was  always  good;  now  it  is  the  farmers'  accounts  which  are 
most  diligently  sought  after. 

Considerations  of  the  question  of  rural  credit  usually 
separate  the  problems  of  mortgage  credit  and  personal 
credit.  The  agencies  engaged  in  supplying  farm  mortgage 
credit  in  Iowa  have  already  been  described.  The  Iowa 
farmer  with  integrity  and  ability  has  no  problem  of  secur- 
ing personal  credit  even  when  his  capital  is  limited.  Bank- 
ers are  especially  keen  to  assist  capable  young  men  to  start 
farming  realizing  that  in  a  few  years  they  will  probably  be 
valuable  customers  of  the  institution.  Short-time  loans  are 
made  to  the  farmer  for  various  purposes,  one  of  the  most 
popular  types  being  those  made  for  cattle  feeding.  These 
loans  are  usually  liquidated  in  from  ninety  days  to  six 
months.  They  are  usually  made  by  the  bankers  without 
any  chattel  mortgage  or  lien  on  the  livestock,  but  the  losses 
are  practically  negligible  and  many  bankers  testify  to  the 
desirability  of  this  class  of  paper. 

Interest  rates  charged  on  loans  are  relatively  stable.  The 
extreme  fluctuations  of  the  call  money  market  are  not  found 
in  the  Iowa  banks.  In  recent  years  commercial  loans  have 
been  made  at  rates  varying  from  six  to  eight  per  cent.  The 
credit  condition  during  and  following  the  war  have  forced 
rates  in  all  of  the  banks  to  practically  eight  per  cent,  the 
maximum  permitted  by  law.'^^'*  On  mortgage  loans  the  rate 
is  as  low  as  six  per  cent. 

The  Federal  reserve  system,  by  its  rediscount  facilities, 
makes  it  possible  for  a  member  bank  to  render  its  commun- 


BANKS  AND  THE  COMMUNITY  341 

ity  the  maximum  of  service.  As  long  as  a  bank  can  make 
profitable  loans  covering  self -liquidating  commercial  trans- 
actions, it  may  continue  to  do  so  and  look  to  the  Federal 
reserve  bank  to  rediscount  its  paper.  Added  resources  are 
thus  made  available  to  the  community  which  it  serves.  As 
yet  this  privilege  has  not  been  used  very  widely  by  banks 
in  the  smaller  communities  but  in  some  instances  this  has 
been  done  successfully. ^^^  Bankers  are  beginning  to  realize 
that  the  old  idea  that  rediscounting  is  a  sign  of  weakness 
can  no  longer  be  sustained  in  view  of  the  facilities  available 
at  the  Federal  reserve  banks. 

SECONDAEY  BANKING  FUNCTIONS 

The  banks  of  Iowa  serve  the  communities  in  various  ways 
which,  while  important,  may  be  classed  as  secondary  bank- 
ing functions.  Of  these  we  shall  consider  investment  serv- 
ice, selling  domestic  and  foreign  exchange,  acting  in  a 
fiduciary  capacity,  and  engaging  in  the  safe  deposit  busi- 
ness. 

Investment  Service: — Strictly  investment  banks  are  not 
numerous  in  Iowa.  Therefore  the  commercial  bank's  ac- 
tivity has  included  the  providing  of  safe  investment  secur- 
ities for  such  of  its  customers  as  have  accumulated  enough 
to  want  a  permanent  investment.  It  may  not  seem  con- 
sistent for  a  bank  to  maintain  a  savings  department  and  at 
the  same  time  provide  facilities  through  which  the  investor 
may  withdraw  his  savings  from  the  custody  of  the  bank. 
This  seems  to  be  particularly  the  case  where  the  banker 
does  not  receive  any  compensation  for  the  assistance  given 
the  customer  in  selecting  and  placing  his  investments.  On 
the  other  hand  it  is  certainly  not  consistent  for  banks  to 
stimulate  and  safeguard  individual  savings  and  then  leave 
the  investor  to  deal  unassisted  with  unscrupulous  promoters 
and  blue  sky  artists. 


342  HISTORY   OF    BANKING   IN   IOWA 

Experienced  bankers  have  found  that  many  savers  will 
accept  quite  readily  a  return  of  four  per  cent  on  their  sav- 
ings until  they  have  accumulated  several  hundred  dollars. 
When  this  amount  is  at  hand  they  desire  to  invest  in  bonds, 
stocks,  or  mortgages  jaelding  a  somewhat  higher  return. 
When  the  customer  knows  that  the  banker  will  assist  him 
in  such  investments  he  turns  to  him  for  advice  and  coopera- 
tion. Then  it  is  that  the  conscientious  "banker  seeks  to  guide 
the  investments  of  his  client.  It  has  been  estimated  that 
$200,000,000  were  spent  in  Iowa  in  the  months  immediately 
following  the  close  of  the  war  for  blue  sky  stock,  much  of 
which  was  worthless  and  proved  a  total  loss  to  investors.'^^- 

Bankers  individually  and  through  the  instrumentality  of 
the  Iowa  Bankers  Association  have  sought  to  discourage 
this  waste  of  capital  and  promote  sound  investments.  One 
way  in  which  this  has  been  done  has  been  by  assisting  cus- 
tomers in  making  their  choice  of  securities.  The  banker 
who  has  ignored  the  request  of  a  patron  for  help  in  convert- 
ing his  savings  account  into  a  permanent  investment  has 
often  contributed  indirectly  to  the  promotion  of  wild-cat 
flotations.  By  giving  their  assistance  many  bankers  have 
built  up  the  confidence  and  good  will  of  their  customers,  and 
have  been  instrumental  in  retaining  a  considerable  balance 
in  the  savings  account.  The  saver  usually  does  not  care  to 
find  an  investment  which  will  take  care  of  the  last  penny 
in  his  savings  account,  but  is  often  satisfied  if  he  sees  the 
major  portion  thereof  converted  into  permanent  invest- 
ments yielding  a  higher  rate  of  return. 

Providing  Domestic  and  Foreign  Exchange: — Iowa  banks 
are  not  called  upon  extensively  to  provide  foreign  exchange 
for  their  customers  but  most  of  them  are  in  a  position,  di- 
rectly or  indirectly,  to  serve  their  communities  in  this  way. 
Buying  and  selling  domestic  exchange  was  one  of  the  im- 
portant functions  of  the  early  Iowa  banker  and  one  from 


BANKS  AND  THE  COMMUNITY  343 

which  he  derived  a  considerable  amount  of  profit.  During 
the  past  generation  the  personal  check  has  been  largely 
substituted  for  the  bank  draft  in  settling  out-of-town  obliga- 
tions. In  order,  however,  for  a  bank  to  be  in  a  position  to 
make  remittances  on  its  customers'  checks,  it  is  necessary 
for  it  to  maintain  accounts  with  correspondent  banks  or 
become  a  member  of  the  Federal  reserve  clearing  system. 
All  Iowa  banlis  are  now  on  the  Federal  reserve  par  list,  but 
even  before  the  inauguration  of  this  system  exchange 
charges  had  largely  been  eliminated. 

Fiduciary  Services: — Under  the  Iowa  law  as  it  stands 
now  all  classes  of  banks  are  authorized  to  act  in  the  capacity 
of  trustee,  executor,  administrator  of  estates,  or  guardians. 
A  considerable  number  of  Iowa  banks  have  qualified  to  act 
in  this  capacity  and  have  established  a  distinct  trust  de- 
partment. In  addition  to  those  which  have  made  a  spe- 
cialty of  this  feature  other  banks  generally  stand  ready  to 
help  their  clients  in  these  matters.  Bankers  often  urge 
patrons,  having  property  to  dispose  of,  to  make  a  will  and 
thus  direct  its  disposition  while  living.  Usually  the  banker 
does  not  undertake  personally  to  draw  the  will,  but  suggests 
the  retention  of  a  lawyer  for  this  purpose.  In  some  cases, 
however,  the  banks  advertise  that  they  are  prepared  to 
have  the  will  drawn  in  legal  form  and  urge  the  selection 
of  the  bank  as  executor.'^^^ 

Safety  Deposit  Business: — An  incidental  function  of  the 
modem  bank  which  is  of  growing  importance  is  caring  for 
the  valuable  personal  property  of  its  patrons.  City  banks 
have  established  special  safety  deposit  departments  with 
elaborate  vaults  which  are  equipped  to  care  for  money, 
deeds,  mortgages,  wills,  bonds,  insurance  policies,  and  other 
valuable  documents.  Jewelry  and  silverware  are  stored 
during  the  absence  of  the  owners  on  vacation  trips  and 


344  HISTORY    OF    BANKING    IN    IOWA 

some  banks  have  even  provided  for  summer  storage  of  ex- 
pensive furs.  The  typical  country  bank  of  Iowa  has  ren- 
dered an  equivalent  service,  often  without  cost  to  the  cus- 
tomer. In  its  vault  there  are  usually  provisions  made  for 
keeping  the  valuable  papers  of  its  patrons,  the  larger  cus- 
tomers being  assigned  individual  boxes  and  those  having 
less  business  being  handled  in  a  general  file. 

This  service  has  recently  been  considerably  extended,  due 
to  the  sale  of  war  securities.  In  order  to  protect  the  inter- 
ests of  their  customers,  hundreds  of  whom  had  not  formerly 
owned  valuable  securities,  the  banks  agreed  to  care  for  the 
Liberty  bonds  bought  by  their  patrons.  This  has  involved 
the  additional  labor  of  caring  for  the  same  and  also  in  some 
cases  the  banks  have  gone  so  far  as  to  protect  their  cus- 
tomers by  carrying  additional  burglary  and  fire  insurance, 
at  their  own  expense,  to  cover  these  securities.'^^ 

GENERAL  COMMUNITY  FUNCTIONS 

In  addition  to  strictly  banking  functions  Iowa  banks 
carry  on  many  business  and  community  welfare  services 
for  the  benefit  of  individual  customers  and  also  of  the  com- 
munity as  a  whole.  These  may  be  subdivided  into  busi- 
ness services,  agricultural  services,  and  general  welfare  ac- 
tivities. 

Business  Services: — Among  the  services  of  a  general 
business  nature  which  banks  render  to  the  community  is 
the  establishment  and  maintenance  of  a  high  standard  of 
banking  and  commercial  practice.  An  early  English  author 
placed  among  the  important  services  of  a  bank  the  effect  it 
has  upon  honesty  and  punctuality  in  pecuniary  engagements 
of  the  community  in  which  it  is  established."^^  This  re- 
mains an  important  phase  of  banking  service,  especially  in 
the  rural  communities.  In  many  instances  the  commercial 
practices  of  the  farmer  or  small  town  business  man  are 


BANKS  AND  THE  COMMUNITY  345 

learned  largely  from  his  dealings  with  his  banker.  Laxness 
about  paying  obligations  promptly  when  due  has  been  a 
serious  fault  with  many  farmers.  The  banker  definitely 
undertakes  to  improve  this  situation. ''^'^ 

In  this  connection  the  banks  have  rendered  a  distinct 
service  by  assisting  their  patrons  in  better  accounting 
methods.  Very  few  farmers  keep  accounts,  hence  the  bank- 
ers have  cooperated  in  efforts  to  promote  better  accounting 
methods.  In  1921  the  Agricultural  Committee  of  the  Iowa 
Bankers  Association  reported  that  over  92,000  farm  record 
books  had  been  purchased  in  the  preceding  four  years  from 
the  Iowa  State  Agricultural  College  by  Iowa  banks  for  the 
use  of  their  customers.^^^ 

In  more  recent  years  banks  have  increasingly  called  upon 
their  customers  to  furnish  financial  statements  when  apply- 
ing for  a  loan.  The  Federal  reserve  banks  have  requested 
member  banks  to  secure  financial  statements  from  borrow- 
ers wherever  possible  if  the  paper  is  to  be  rediscounted  by 
the  Federal  reserve  bank.  The  necessity  for  making  income 
tax  returns  has  also  contributed  to  the  development  of  bet- 
ter accounting  methods. 

Another  business  service  which  the  banks  render  their 
patrons  is  in  urging  them  to  carry  adequate  insurance  to 
protect  themselves  against  loss  of  property  or  provide  for 
their  families  in  the  event  of  premature  death.  Often  the 
banker  in  a  small  community  is  himself  an  agent  for  various 
insurance  companies.  In  that  case  it  is  a  matter  of  com- 
missions as  well  as  service  which  prompts  him  to  see  to  it 
that  his  customers  are  carrying  the  proper  amount  of  insur- 
ance. Again  it  may  be  a  precaution  taken  to  protect  the 
bank's  own  interest  where  a  loan  is  made  to  the  individual. 
But  in  many  cases  the  banker  suggests  the  desirability  of 
insurance  where  he  has  no  personal  end  to  gain. 

A  further  function  of  the  banker  is  to  encourage  the  de- 
velopment of  new  commercial  enterprises  in  a  community. 


346  HISTORY    OF   BANKING   IN    IOWA 

He  aids  in  building  up  his  local  community  by  attracting 
new  capital  to  the  support  of  local  industries.  In  the  small 
towns  he  renders  a  valuable  service  by  doing  his  part  to 
keep  capable  young  men  at  home.  By  pointing  out  busi- 
ness opportunities  and  aiding  with  adequate  credit  he  can 
often  overcome  the  lure  of  the  city. 

Banks  have  always  served  their  patrons  by  assisting  them 
with  their  tax  problems.  The  bank  receives  payment  of 
local  taxes  and  thus  saves  its  customer  the  necessity  of  mak- 
ing a  trip  to  the  county  seat  solely  to  pay  taxes.  In  recent 
years  the  banks  have  also  been  called  upon  to  render  a  large 
service  in  connection  with  the  Federal  income  tax.  Iowa 
has  not  had  a  State  income  tax,  hence  the  problem  of  com- 
puting taxable  income  is  a  new  one  for  most  of  its  citizens. 
Bankers  have  done  all  they  could  to  assist  in  these  problems. 
In  January,  1920,  an  Income  Tax  Short  Course  was  con- 
ducted at  Iowa  City  under  the  direction  of  the  Iowa  Bank- 
ers Association  and  the  State  University  of  Iowa.  About 
600  persoris,  chiefly  bankers,  registered  for  the  course.'^** 

Agricultural  Services: — In  addition  to  the  general  busi- 
ness functions  there  are  certain  special  services  which  the 
bankers  render  to  agriculture,  the  dominant  industry  with 
which  most  of  them  come  in  contact.  In  the  interest  of 
better  farming  the  bankers  have  backed  the  movement  for 
county  agents  and  farm  demonstrators.  With  the  purpose 
of  developing  better  farmers  the  bankers  have  fostered  the 
work  of  the  boys '  and  girls '  clubs.  Prizes  have  been  offered 
by  the  Iowa  Bankers  Association  and  also  by  individual 
bankers  for  statewide  or  local  contests  in  grain  raising,  at 
live  stock  shows,  and  at  other  agricultural  exhibitions. 

In  1915,  in  cooperation  with  the  Iowa  State  College  at 
Ames,  the  "Iowa  boys'  corn  contest"  was  promoted  by  the 
Iowa  Bankers  Association.  The  boy  raising  the  best  acre 
of  corn  in  Iowa  was  given  a  free  trip  to  the  Panama  Exposi- 


BANKS  AND  THE  COMMUNITY  347 

tion.  Again,  in  1917  the  agricultural  committee  was  active 
in  cooperating  with  the  work  done  at  the  State  College. 
A  two-year  course  for  farm  boys  was  endorsed,  the  ' '  acre 
yield  contest"  was  supported,  and  a  $25  prize  was  donated 
for  the  best  exhibits  of  alfalfa  made  at  the  annual  show 
of  the  Iowa  Corn  and  Small  Grain  Growers  Association/^^ 

Promotion  of  live  stock  raising  and  feeding  is  another 
phase  of  the  banker's  contribution  toward  better  farming. 
This  is  accomplished  primarily  by  furnishing  proper  credit 
for  the  purchase  of  cattle  for  feeding  purposes.  The  banker 
often  restrains  the  inexperienced  cattle  feeder  from  plung- 
ing in  too  heavily  after  a  single  season  of  successful  feeding 
operations.  The  attitude  of  local  bankers  toward  the  live 
stock  industry  is  an  important  factor  in  its  development. 
Soil  fertility  is  maintained,  crop  rotation  is  practiced,  and 
a  better  type  of  farming  is  thereby  promoted. 

In  some  communities  the  banker  has  endeavored  to  com- 
bat the  evil  of  farm  tenancy  by  encouraging  absentee  land 
owners  to  sell  their  farms  and  helping  the  tenant  farmers 
solve  the  credit  problem.  There  are  many  agencies  ready 
to  accept  first  mortgages  up  to  approximately  fifty  per  cent 
of  the  selling  value  of  the  land.  But  a  recent  survey  of 
conditions  in  a  typical  Iowa  community  showed  that  the 
average  net  worth  of  tenants  was  only  about  eleven  per  cent 
of  the  average  investment  per  f arm.'^^'^  In  view  of  this  situ- 
ation the  banker  undertakes  to  assist  tenant  farmers  in  se- 
curing an  additional  twenty-five  to  forty  per  cent  of  the 
purchase  price. 

Farm  sales  are  important  business  events  of  the  rural 
community  during  the  winter  months.  Some  of  these  are 
closing  out  sales  of  men  who  are  retiring  from  farming  or 
moving  to  another  locality;  others  are  stock  sales  for  the 
purpose  of  disposing  of  surplus  breeding  animals.  The 
two  important  officials  at  these  sales  are  the  auctioneer  and 
the  clerk.     The  latter  position  is  filled  by  the  cashier  or 


348  HISTORY   OF   BANKING   IN   IOWA 

other  official  of  the  farmer 's  local  bank.  The  clerk  not  only- 
keeps  the  record  of  the  sales  but  makes  the  entire  settlement. 
He  must  know  the  buyers,  must  be  able  to  decide  offhand 
how  much  credit  to  extend  to  them  on  a  promissory  note,  and 
be  prepared  to  look  after  all  details  of  the  settlement. 

COMMUNITY  WELFAEE  FUNCTIONS 

In  the  educational  field  Iowa  bankers  have  been  especially 
active  in  movements  to  improve  the  rural  schools  of  the 
State.  The  Iowa  Bankers  Association  has  supported  the 
movement  for  consolidated  schools  and  has  cooperated  with 
the  Superintendent  of  Public  Instruction  to  secure  sound 
legislation  for  this  purpose.  Individual  bankers  will  be 
found  active  on  the  local  school  boards,  library  boards, 
Chautauqua  committees,  and  other  agencies  for  educational 
betterment.  "^^^ 

The  good  roads  movement  has  also  received  the  support 
of  the  bankers,  a  special  committee  of  the  Iowa  Bankers 
Association  having  been  regularly  appointed  for  this  pur- 
pose. In  1915  a  resolution  was  passed  favoring  hard-sur- 
faced roads  paid  for  by  bond  issues,  with  assessment  accord- 
ing to  the  special  benefit  received.  Similar  legislation  was 
urged  the  following  year,  but  when  the  United  States  en- 
tered the  World  War  the  committee  advised  postponement 
of  such  action  and  the  utilization  of  all  available  resources 
for  the  task  of  winning  the  war.  In  1919  the  Association 
cooperated  with  other  organizations  and  individuals  to  se- 
cure the  passage  of  legislation  to  improve  the  primary  road 
system  of  the  State.'^^^ 

Quite  apart  from  their  organized  efforts  on  behalf  of  the 
community  the  bankers  are  often  called  upon  personally 
to  serve  the  various  educational,  philanthropic,  religious, 
and  social  organizations  of  their  town.  When  electing  a 
treasurer  for  a  college,  a  school  board,  a  library  association, 
a  church,  a  community  chautauqua,  a  Fourth  of  July  com- 


BANKS  AND  THE  COMMUNITY  349 

mittee,  or  a  village  ball  club,  the  choice  is  more  likely  than 
not  to  be  a  banker.  This  service  is  usually  undertaken  by 
the  banker  as  his  contribution  to  the  community  welfare. 
Among  the  boosters  for  public  improvements  of  all  kinds — 
electricity,  sewerage,  water,  pavement,  municipal  play- 
grounds— the  local  banker  usually  takes  a  leading  part. 
Bankers  can  and  have  done  something  toward  encouraging 
the  building  of  better  farm  homes  with  more  conveniences 
for  the  housekeeper. 

WAE  ACTIVITIES 

An  example  of  the  public  spirited  service  of  the  bankers 
was  given  by  their  part  in  the  bond  campaigns  during  the 
World  War.  In  the  first  bond  campaign  the  organization 
already  established  by  the  Iowa  Bankers  Association  was 
used  in  directing  the  sale  of  bonds.'^^^  Each  of  the  eleven 
groups  of  the  Iowa  Bankers  Association  had  an  '*  agricul- 
tural committeeman"  and  in  every  county  there  was  a 
*' county  agricultural  chairman".  This  agricultural  com- 
mittee organization  was  the  working  basis  through  which 
the  Federal  Reserve  Bank  carried  on  its  organization.'^^* 
In  the  later  campaigns  the  sales  were  handled  by  the  organ- 
ization set  up  by  the  Federal  Eeserve  Bank  of  Chicago,  but 
the  Iowa  Bankers  Association  cooperated  throughout  all  of 
the  selling  campaigns. 

In  the  actual  floating  of  the  loans  the  bankers  of  the  com- 
munities were  especially  called  upon  to  help.  They  dis- 
tributed circulars  and  application  blanks,  received  subscrip- 
tions, transmitted  the  money  to  the  Federal  reserve  banks, 
converted  bonds,  paid  the  interest  coupons,  and  otherwise 
acted  as  fiscal  agent  for  the  government.  For  this  service 
the  banks  received  no  compensation,  not  even  the  franking 
privilege  for  correspondence  in  connection  with  the  collec- 
tion of  the  bond  installments.  They  were  put  to  consider- 
able additional  expense  in  carrying  on  this  work,  for  which 
they  received  very  little  tangible  return. 


350  HISTORY    OF   BANKING    IN   IOWA 

The  banks  purchased  bonds  on  their  own  behalf  and  took 
their  share  of  the  treasury  certificates  of  indebtedness. 
They  usually  made  arrangements  to  permit  purchasers  of 
bonds  to  pay  on  a  weekly  or  monthly  installment  basis  ex- 
tending over  a  longer  period  than  the  Treasury  plan  al- 
lowed. Bond  buyers  were  granted  more  favorable  interest 
rates  than  the  usual  commercial  terms  when  it  was  neces- 
sary to  borrow  in  order  to  buy,  and  liberal  credit  was 
granted  by  many  bankers  to  the  bond  purchasers  for  the 
purpose  of  encouraging  the  purchase  of  Liberty  bonds.'^^^ 

The  service  of  the  bankers  in  the  sale  of  war  bonds  has 
been  summarized  by  N.  R.  Whitney  as  follows:  "Indeed 
it  may  truly  be  said  that  no  group  of  men  and  no  organiza- 
tion in  Iowa  can  claim  a  greater  share  in  the  glorious 
achievement  of  the  State  in  the  bond  campaigns  than  can 
the  bankers  of  this  State,  and  it  should  be  added  that  among 
the  bankers  are  included  the  various  bond  houses  and  bond 
salesmen  who  devoted  their  time  and  energy  often  without 
any  compensation  and  often  at  a  loss  to  themselves  in  help- 
ing to  sell  the  war  bonds. '  '^^^ 

In  the  matters  of  preparedness  and  support  of  the  govern- 
ment's war  activity  the  bankers  have  been  very  emphatic. 
At  the  1916  convention  of  the  Iowa  Bankers  Association  a 
resolution  favoring  preparedness  was  passed.  In  1917  the 
resolutions  cited  with  apparent  pride  the  success  of  the 
Liberty  loan  and  the  part  played  therein  by  the  bankers  of 
Iowa.  Loyalty  and  continued  service  to  the  government 
was  pledged  at  that  time  and  a  $5000  subscription  to  Lib- 
erty bonds  was  made  by  the  Association.  The  published 
proceedings  of  the  1919  convention  contained  an  honor  roll 
of  747  names  of  men  from  Iowa  banks  then  serving  directly 
with  the  colors.  In  this  list  were  found  the  names  of  four 
bank  presidents,  three  directors,  ten  vice  presidents,  sev- 
enty-three cashiers,  two  hundred  and  eighty-two  assistant 
cashiers,  and  three  hundred  and  seventy  clerks.''^^^ 


BANKS  AND  THE  COMMUNITY  351 

CHANGE  IN  THE  POPULAE  ATTITUDE  TOWAED  BANKS 

The  bankers  of  a  generation  ago  did  not  undertake  to 
serve  the  welfare  of  the  community  to  the  same  degree  that 
the  modern  banker  now  does.  Often  the  bankers  adopted 
an  attitude  of  coldness  toward  their  customers  and  aloof- 
ness from  the  business  interests  of  the  community.  They 
were  apparently  afraid  to  trust  the  people  and  take  them 
into  their  confidence.  As  a  result  there  was  rather  wide- 
spread prejudice  against  banks  and  bankers  in  most  com- 
munities. 

An  interesting  account  of  the  former  attitude  has  been 
given  by  Henry  Meyer,  a  former  Iowa  banker,  who  relates 
his  experience  on  this  point  as  follows :  "In  the  olden  days 
a  banker  was  a  'God  with  a  bell  on'  in  his  town.  People 
that  had  any  banking  to  do  came  to  him  and  he  dictated  the 
terms.  I  remember  very  well  when  in  '83  Governor  Larra- 
bee  asked  me  to  take  charge  of  the  First  National  Bank  at 
Elkader  when  I  had  had  no  banking  experience.  I  asked 
him  to  give  me  some  pointers  and  the  first  one  he  gave  was 
not  to  ask  anyone  to  do  business  with  me,  because  in  solicit- 
ing such  the  bank  was  placing  itself  under  obligations  to  a 
possible  customer  and  when  asking  for  an  accommodation  it 
would  perhaps  be  harder  to  say  'no'  than  otherwise. "'^^^ 

One  of  the  earliest  problems  engaging  the  serious  atten- 
tion of  the  Bankers  Association  was  how  to  combat  the 
popular  prejudice  against  banks.  In  his  address  of  wel- 
come to  the  second  annual  convention  Mayor  Osborne  of 
Spirit  Lake  referred  to  the  misunderstanding  on  the  part 
of  the  public  toward  the  banker.  He  said  that  the  epithets 
"robber"  and  "usurer"  are  not  uncommonly  hurled  at  the 
banker.  President  G.  L.  Tremain,  in  his  response,  recog- 
nized the  existence  of  this  distrust  and  suspicion  when  he 
referred  in  one  place  to  the  demagogue  who  "will  yet  ha- 
rangue the  voters  of  his  district  and  point  with  alarm  to 
the  meeting  of  Iowa  bankers  at  Spirit  Lake."^*^ 


352  HISTORY    OF   BANKING   IN   IOWA 

The  existence  of  this  popular  distrust  was  noted  again  in 
1889  by  Mayor  P.  Mullally  of  Cedar  Rapids.  ^'The  bank- 
er", he  declared,  ''in  the  popular  opinion  of  a  large  class 
of  persons,  is  considered  cold  and  repellant,  grasping  and 
unsympathetic,  anxiously  seeking  opportunity  to  hold  as 
his  own  that  which  belongs  to  another;  that  he  is  unceas- 
ingly weaving  a  web  of  innumerable  though  almost  imper- 
ceptible claims  on  his  customers '  influence  and  business  for 
the  purpose  not  altogether  mutual  in  their  advantages ;  that 
his  social  exterior  and  advances  are  as  one  who  angles 
cautiously  that  his  net  may  be  well-filled."^^**  He  asserted 
that  the  opinion,  while  not  a  fair  estimate  of  bankers  as  a 
class,  was,  however,  true  of  many  bankers.  At  this  same 
convention  there  was  under  discussion  a  motion  to  appoint 
a  legislative  committee.  The  suggestion  was  opposed  by 
some  members  on  the  ground  that  it  would  throw  suspicion 
on  the  Association.  J.  H.  Branch,  the  President,  concluded 
his  remarks  by  saying,  ''and  that  there  shall  not  be  anything 
to  add  to  the  odium  already  resting  on  bankers." 

Again,  in  the  fourth  and  sixth  conventions  this  problem 
was  confronted.  A  delegate  raised  the  question  as  to  how 
best  to  reduce  the  prejudice  of  the  common  people  against 
banking  interests  and  made  this  significant  remark :  ' '  We 
are  ...  at  war  with  the  farmer  and  the  farmer  with 
us".  Calvin  Manning  of  Ottumwa,  vice  president  of  the 
Iowa  National  Bank,  explained  this  prejudice  as  the  result 
of  political  agitation.  He  believed  it  could  be  counteracted 
if  dealt  with  in  a  proper  business  way.  In  1897  Mayor  Wm. 
McNett  of  Ottumwa  again  brought  up  this  question.  He 
attributed  the  existing  prejudice  to  the  policy  of  isolated 
and  independent  action  long  pursued  by  the  banks.  He 
believed  that  sound  banking  principles  were  fundamental, 
and  that  by  taking  the  people  into  his  confidence  the  banker 
could  destroy  the  influence  of  the  demagogue.'^^^ 

The  policy  pursued  by  individual  bankers  and  by  the  Iowa 


BANKS  AND  THE  COMMUNITY  353 

Bankers  Association  has  followed  the  direction  suggested 
by  Mayor  McNett.  As  a  result,  the  suspicion  and  prejudice 
against  banks,  which  existed  even  as  late  as  the  close  of  the 
nineteenth  century,  has  practically  disappeared.  This  has 
resulted  in  the  almost  universal  use  of  the  banks  by  the 
people  of  Iowa;  especially  has  this  come  to  be  the  case  in 
the  agricultural  sections. 

ACCESSIBILITY  OF  BANKS 

Perhaps  the  most  distinctive  feature  of  Iowa  banking  is 
the  large  number  of  banks,  especially  in  relation  to  the 
population  of  the  State.  This  in  itself  would  appear  to  be 
evidence  of  the  fact  that  banks  in  Iowa  are  generously  sup- 
ported by  the  people. 

For  at  least  eleven  years  Iowa  has  led  all  States  in  the 
total  number  of  banks.  In  1910  Iowa  had  a  population  of 
2,224,771,  ranking  fifteenth  among  the  several  States.  In 
1920  the  population  was  2,404,021.'^^^  Recent  statistics  place 
the  total  number  of  banks  in  Iowa  at  from  1915  to  1930, 
depending  on  just  what  institutions  are  included.  This 
gives  approximately  one  bank  to  every  1250  persons. 

No  single  explanation  is  to  be  found  for  this  unusual 
number  of  banks.  Obviously  the  banks  must  command  the 
patronage  of  practically  all  members  of  the  coipomunity.  A 
further  explanation  for  the  strong  banking  position  of  the 
State  is  to  be  found  in  the  high  per  capita  wealth  of  the 
citizens.  In  1912  the  per  capita  estimated  value  of  all  prop- 
erty in  the  United  States  was  $1965.  The  per  capita  wealth 
of  Iowa  was  nearly  double  that  of  the  average  for  all  of  the 
States,  being  $3539.'^'53 

The  large  volume  of  rural  business  tributary  to  the  small 
towns  of  the  State  seems  to  be  the  explanation  for  the  estab- 
lishment of  such  a  large  number  of  banks.  The  larger  cities 
of  the  State  are  well  supplied  with  banking  institutions  but 
the  vast  majority  of  Iowa  banks  are  of  necessity  in  small 

23 


354  HISTORY   OF   BANKING   IN   IOWA 

towns.  In  1915  there  were  893  incorporated  municipalities 
in  Iowa.  Fifteen  of  these  were  cities  of  the  first  class,  hav- 
ing a  population  of  15,000  or  more ;  ninety  were  cities  of  the 
second  class,  having  a  population  of  2000  but  less  than 
15,000;  788  were  incorporated  towns.  Of  the  latter  103  had 
more  than  1000  population;  220  had  between  500  and  1000 
population  and  465  had  less  than  500  inhabitants."^^* 

These  small  towns,  a  large  percentage  of  which  have  less 
than  1000  inhabitants,  are  the  location  of  a  large  number 
of  Iowa's  numerous  banks.  For  instance  the  town  of  North 
Liberty,  near  Iowa  City,  had  a  population  of  less  than  200 
in  1915  but  reported  two  live  banks  in  1918.'^^  Battle  Creek 
was  a  town  of  688  population  in  1915 ;  the  three  banks  of  the 
town  had  aggregate  resources  of  $2,453,167  on  June  30, 
1920.'^''  Even  small  unincorporated  places  sustain  in  some 
instances  one  or  more  thriving  banks  which  sometimes  do 
considerable  business. 

The  ability  of  these  small  towns  to  support  banks  is  a 
source  of  surprise  to  many  persons  not  accustomed  to  the 
Iowa  situation.  It  must  be  remembered  that  banks  can  be 
established  in  Iowa  with  a  minimum  capital  of  $10,000, 
hence  many  of  these  banks  are  small  institutions.  But,  as 
in  the  case  of  Battle  Creek,  the  banking  capital  and  re- 
sources are  often  far  more  than  might  be  expected  in  such 
small  towns.  The  banks  find  a  large  demand  for  loans  in 
financing  the  agricultural  operations  in  the  territory  tribu- 
tary to  the  towns.  By  offering  liberal  interest  on  savings, 
for  instance  five  per  cent  at  Battle  Creek,  the  banks  are  able 
to  attract  a  large  volume  of  savings  deposits. 

As  a  result  of  this  large  number  of  banks  competition  in 
the  banking  business  is  very  keen.  For  the  most  part  it  is 
clean  competition  and  brings  to  the  communities  the  maxi- 
mum of  service  from  the  banks.  Banks  are  accessible  to 
all  the  people  of  the  State  and  stand  ready  to  assist  in  the 
development  of  their  respective  communities. 


BANKS  AND  THE  COMMUNITY  355 

OWNEESHIP  OF  THE  BANKS 

An  important  factor  in  enlarging  the  place  of  the  banks 
in  the  community  has  been  the  increasing  proportion  of  in- 
corporated banks  with  wide  diffusion  of  ownership  of  the 
bank's  capital  stock.  Ordinarily  the  bank  is  not  an  inde- 
pendent business  institution  owned  by  men  who  are  unas- 
sociated  with  other  industries  and  commercial  undertakings. 
It  is  still  true  that  private  banks  are  owned  and  operated 
by  one  man  or  a  small  number  of  partners  whose  sole  busi- 
ness is  that  of  banking.  Where  an  incorporated  bank  has 
succeeded  a  private  bank  the  same  situation  often  pre- 
vails in  a  modified  degree.  The  banker  associates  with  him 
a  number  of  the  successful  business  men  of  his  community 
but  he  retains  the  controlling  interest  in  the  institution. 
Under  these  circumstances  he  is  the  president  of  the  bank 
and  its  active  manager,  devoting  his  whole  time  to  the  bank- 
ing business.  This  same  situation  may  even  exist  where 
the  institution  begins  business  as  an  incorporated  bank  at 
the  outset.  Often,  however,  the  principal  stockholders,  in- 
cluding the  president,  are  men  active  in  other  lines  of  busi- 
ness. Active  management  is  then  intrusted  to  the  cashier, 
a  salaried  executive. 

Reports  published  by  the  banking  department  do  not  fur- 
nish any  information  concerning  the  distribution  of  owner- 
ship of  the  banks  of  the  State.  A  representative  bank  with 
a  capital  of  $100,000  has  at  present  ninety-four  stockhold- 
^j.g  757  rpj^g  $35,000  capital  stock  of  a  country  bank  was 
subscribed  by  forty  persons  no  one  of  whom  held  more  than 
twenty-five  shares.'^'^^ 

Stockholders  are  nearly  always  customers  of  the  institu- 
tion, hence  wide  distribution  of  stock  gives  the  bank  a  sub- 
stantial group  of  regular  patrons.  In  some  instances  a 
bank  which  wishes  to  enlarge  its  capitalization  offers  the 
entire  block  of  new  stock  to  men  outside  of  the  existing 
group  of  stockholders.     By  this  means  new  customers  have 


356  HISTORY    OF    BANKING    IN    IOWA 

been  brought  into  the  bank.  At  times  the  same  thing  has 
been  done  for  the  purpose  of  preventing  the  formation  of 
a  rival  institution. 

It  appears  that  banks  located  in  the  small  towns  are 
largely  owned  by  the  farmers  of  the  community.  No  statis- 
tical data  can  be  presented  on  this  point,  but  the  conclusion 
is  supported  by  the  opinion  of  representative  Iowa  bankers. 
H.  T.  Blackburn,  President  of  the  Iowa  Bankers  Associa- 
tion, stated  at  the  1916  meeting  that  Iowa  farmers  owned 
seventy-five  per  cent  of  the  banks  represented  at  the  con- 
vention.'^^^  D.  H.  Hedrick,  a  country  banker  with  a  wide 
knowledge  of  Iowa  conditions,  states  as  his  opinion  that 
^'the  majority  of  the  rural  banks  in  Iowa  are  owned  by  the 
farmers,  either  active  or  retired. '  ''^®" 

PEOFITS  OF  THE  BANKS 

Very  few  institutions  probably  render  as  many  gratuitous 
services  for  the  community  as  do  the  banks.  On  the  whole, 
however,  the  profits  paid  by  banks  to  their  stockholders  have 
been  highly  satisfactory.  In  endeavoring  to  present  statis- 
tics in  regard  to  earnings,  the  student  of  Iowa  banking  is 
again  met  with  the  difficulty  of  incomplete  data.  Some 
States  secure  reports  on  earnings  and  dividends  of  all 
banks,  but  Iowa  reports  contain  no  information  on  this 
point.  All  national  banks  must  make  semi-annual  state- 
ments of  earnings  and  dividends  as  well  as  the  principal 
sources  of  these  earnings.  These  are  the  only  complete 
data  for  any  class  of  Iowa  banks.  Table  XV  presents  some 
statistics  which  indicate  the  profits  in  certain  banks. 

This  table  does  not  include  the  data  for  banks  in  the  four 
reserve  cities  of  Iowa.  If  these  had  been  included,  however, 
the  results  would  not  be  very  much  changed.  For  instance 
in  1919  the  ratio  of  net  earnings  to  capital  and  surplus 
combined  was  11.98  per  cent  in  the  country  national  banks. 
In   the   reserve    cities    the   earnings    averaged    somewhat 


BANKS  AND  THE  COMMUNITY 
Table  XV 


357 


Net  Earnings  and  Dividends  of  the  Country  National  Banks 

IN  Iowa,  1896-1919^«^ 

Percentage  of 

Percentage  of 

Ybar 

Dividends  to  Capital 

Net  Earnings  to  Capital 
and  Surplus 

1896 

8.0 

6.8 

1897 

7.1 

6.1 

1898 

7.7 

6.8 

1899 

9.2 

8.7 

1900 

8.6 

8.1 

1901 

9.95 

8.95 

1902 

10.46 

11.66 

1903 

10.0 

11.8 

1904 

9.6 

10.6 

1905 

9.7 

8.9 

1906 

10.7 

9.7 

1907 

10.2 

11.2 

1908 

9.6 

9.9 

1909 

9.9 

10.0 

1910 

11.2 

10.6 

1911 

11.9 

11.0 

1912 

11.54 

10.73 

1913 

14.00 

11.73 

1914 

12.56 

11.31 

1915 

12.18 

11.01 

1916 

13.21 

11.32 

1917 

13.42 

12.11 

1918 

13.28 

10.77 

1019 

13.58 

11.98 

higher,  being  11.42  per  cent  in  Dubuque,  14.00  per  cent  in 
Cedar  Rapids,  15.31  per  cent  in  Des  Moines,  and  15.36  per 
cent  in  Sioux  City.'^^^ 

Partial  statistics  are  available  for  State  supervised  banks, 
but  continuous  data  concerning  either  the  amount  or  source 
of  their  earnings  can  not  be  presented.  In  1914  and  1915 
the  Comptroller  published  reports  of  such  State  and  pri- 
vate institutions  as  submitted  statements  to  him.  In  1914, 
200  State  banks  reported  dividends  averaging  9.84  per  cent 
of  their  capital;  510  savings  banks  10.01  per  cent;  9  loan 
and  trust  companies  8.97  per  cent;  and  32  private  banks 
20.62  per  cent.     The  following  year  the  number  of  reporting 


358  HISTORY   OF    BANKING   IN   IOWA 

banks  and  percentage  of  dividends  were:  199  State  banks 
10.68  per  cent,  520  savings  banks  17.63  per  cent,  12  loan 
and  trust  companies  10.12  per  cent,  and  33  private  banks 
15.58  per  cent.^^* 

The  proportion  of  State  supervised  banks  making  this 
report  to  the  Comptroller  was  large  enough  to  warrant  the 
assumption  that  these  figures  are  fairly  representative. 
They  show  that  the  dividends  paid  are  as  large  in  the  State 
institutions  as  in  the  national  banks.  State  and  savings 
banks  have  smaller  average  capital,  but  they  had,  neverthe- 
less, a  somewhat  higher  percentage  of  capital  to  total  assets 
than  the  national  banks.'^*'^  They  are  not  required  to  build 
up  a  surplus,  however,  unless  they  wish  to  qualify  to  act  in 
a  fiduciary  capacity.  They  have  also  been  freer  in  the  past 
in  the  matter  of  investments  and  have  had  greater  liberty 
to  engage  in  outside  activities  for  profit. 

Only  about  one-tenth  of  the  private  banks  reported  their 
earnings,  so  that  the  data  concerning  this  class  are  too  in- 
complete to  be  of  value  in  making  generalizations.  The 
banks  which  did  report  show  earnings  so  distinctly  above 
those  of  the  incorporated  banks  as  to  lead  to  the  conclusion 
that  the  greater  liberty  of  action  of  the  unincorporated  bank 
makes  it  possible  to  earn  larger  profits. 

The  analysis  of  the  earnings  of  the  national  banks  shows 
that  the  principal  form  of  income  was  interest  and  discount, 
$19,269,000  out  of  $20,218,000  gross  earnings  being  from  this 
source.  The  second  largest  source  of  income  was  from 
exchange  and  collection  charges,  amounting  to  $310,000  for 
all  of  the  banks.  Banks  outside  of  the  reserve  cities  re- 
ported $142,000  commissions  and  earnings  from  insurance 
premiums  and  the  negotiation  of  real  estate  loans.  The 
right  to  act  as  agent  for  an  insurance  company  or  agent  or 
broker  in  placing  real  estate  loans  was  only  recently  granted 
to  national  banks  by  an  amendment  of  the  Federal  Reserve 
Act.     The  privilege  is  denied  to  banks  in  cities  with  a  popu- 


BANKS  AND  THE  COMMUNITY  359 

lation  over  five  thousand,  thus  ruling  out  the  reserve  cities. 
Miscellaneous  earnings  aggregated  $497,000/®^ 

BANK  PUBLICITY 

Methods  of  attracting  business  to  the  bank  and  building 
up  the  position  of  banking  institutions  in  the  community 
have  undergone  marked  changes  in  recent  years.  The  best 
means  of  attracting  and  holding  customers  is  unquestion- 
ably personal  service.  The  various  services  which  the 
banks  render  to  their  individual  customers  include  first  of 
all  taking  care  of  their  legitimate  financial  needs.  The 
prudent  banker  carefully  watches  the  business  enterprises 
of  his  customers  and  is  often  in  a  position  to  anticipate  the 
needs  of  his  patron.  A  case  was  recently  brought  to  the 
writer's  attention  of  an  Iowa  banker  who,  during  a  time  of 
severe  credit  stringency,  had  secured  the  approval  of  the 
board  of  directors  for  a  large  loan  to  a  customer  who  had 
not  made  any  request  therefor.  When  this  man  learned 
that  his  needs  had  been  anticipated  and  that  the  necessary 
money  had  been  set  aside,  he  received  a  new  insight  into  the 
thoughtful  concern  with  which  the  banker  serves  his  regular 
clients. 

One  of  the  most  effective  forms  of  publicity  is  a  personal 
letter  from  the  ofiicers  of  the  bank.  Some  banks  send  out 
these  letters  with  monthly  statements  to  depositors,  divi- 
dend checks,  or  on  other  occasions  when  mail  is  being  sent 
to  patrons.  Often  letters  are  sent  out  to  new  residents  in 
the  community  inviting  them  to  use  the  facilities  of  the  bank. 

Supplying  conveniences  for  the  use  of  the  customers  at 
the  bank  itself  is  another  form  of  service.  Some  country 
banks  have  provided  a  rest  room  for  their  country  patrons. 
Private  rooms  for  business  conferences  are  also  made  avail- 
able. Some  banks  have  placed  an  adding  machine  in  the 
bank  lobbv  for  the  exclusive  use  of  its  customers.    The  re- 


360  HISTORY    OF    BANKING    IN    IOWA 

suit  of  this  is  to  make  the  bank  a  place  to  which  people  may 
often  come  for  other  purposes  than  strictly  banking  service. 

In  the  newspaper  and  periodical  advertising  of  the  pres- 
ent day  banks  have  departed  almost  entirely  from  the 
''tombstone"  type  of  notices  which  formerly  characterized 
bank  advertisements.  Instead  of  stereotyped  advertise- 
ments, giving  merely  the  names  of  the  bank's  officers,  its 
capital  stock,  deposits  or  other  information  concerning  its 
financial  condition,  banks  to-day  call  the  attention  of  the 
reader  to  the  various  services  of  the  bank.  Many  banks 
will  not  allow  their  newspaper  advertising  copy  to  stand 
beyond  a  single  issue  of  the  paper.  Commonly  the  bank 
buys  the  copy  for  its  advertisements  from  the  established 
agencies  and  in  this  way  secures  the  services  of  experts  in 
copy  writing. "^^^ 

The  advertisements  of  three  banks  in  a  typical  small  town 
show  the  appeal  made  regularly  to  the  public.  The  first  is 
''An  Invitation"  to  come  in  and  use  the  bank  for  accounts 
of  any  size.  "We  are  in  Business  to  be  Bothered"  is  the 
challenge  to  the  person  who  thinks  his  business  is  ''too 
trifling  for  the  banker  to  bother  with".  The  second  bank 
advertises  a  saving  plan  which  its  officers  wish  to  explain  to 
all  parties  in  the  community  interested  in  joining.  In  the 
advertisement  of  the  third  bank  is  an  admonition  to  "Pro- 
tect your  home  and  belongings  from  fire".  For  this  pur- 
pose the  bank  offers  the  facilities  of  a  fire  insurance  com- 
pany for  which  some  member  of  its  staff  is  agent. '^®'^  Each 
week  these  banks  present  different  phases  of  their  services 
to  the  reading  public. 

Bank  publicity  includes  the  distribution  of  attractive  wall 
calendars  and  novelties  such  as  coin  purses,  bill-books,  and 
memorandum  books.  A  few  banks  in  Iowa  liave  begun  the 
publication  of  a  monthly  business  bulletin,  but  this  can  only 
be  undertaken  by  the  larger  banks. 

For  the  most  part  banks  seek  to  obtain  their  business  by 


BANKS  AND  THE  COMMUNITY  361 

straightforward  appeal  and  legitimate  business  services. 
But  the  severity  of  competition  is  responsible  for  some 
weaknesses  in  banking  practice.  A  careful  student  of  Iowa 
banking  has  stated  that  one  of  the  most  important  causes 
of  overdrafts  in  Iowa  banks  is  the  intensity  of  competition 
among  banks.  This  has  resulted  in  placing  Iowa  in  the  un- 
enviable position  of  leader  among  the  States  in  the  matter 
of  permitting  overdrafts.^®®  It  is  doubtless  true  also  that 
many  bankers  allow  themselves  to  be  imposed  upon  in  other 
ways  because  of  a  mistaken  attempt  to  retain  business  at 
any  cost. 

Nearly  two  thousand  banks  are  maintained  in  Iowa  com- 
munities, owned  by  thousands  of  different  stockholders. 
Liberal  returns  have  been  paid  upon  the  investment  in  bank 
stock  and  satisfactory  interest  rates  have  been  allowed  de- 
positors for  their  contribution  toward  the  banking  resources 
of  the  State.  The  community  on  its  part  has  received  a  high 
measure  of  service  from  the  banks  at  reasonable  terms. 
Practically  the  only  service  for  which  the  banks  charge  is 
for  the  use  of  their  credit  in  the  form  of  loans  and  dis- 
counts. Other  services  they  contribute  to  their  patrons  and 
the  community.  Doubtless  there  are  still  many  unworthy 
institutions,  but  the  general  record  is  one  of  large  service 
which  has  merited  and  won  the  esteem  and  almost  universal 
patronage  of  the  community. 


XV 

THE  IOWA  BANKERS  ASSOCIATION 

A  generation  ago  it  became  manifest  to  many  progressive 
Iowa  bankers  that  there  was  a  need  for  some  organization 
of  the  bankers  which  would  unify  the  banking  system  of  the 
State  and  eliminate  the  extreme  individualism  which  then 
characterized  the  banking  business.  Accordingly,  twenty- 
nine  bankers,  the  majority  of  whom  represented  Des  Moines 
banks,  issued  a  call  for  a  convention  to  be  held  at  Des  Moines 
on  July  26  and  27,  1887.  The  primary  purpose  of  this  first 
meeting  was  to  effect  the  organization  of  a  State  associa- 
tion. It  was  hoped  that  through  organization  and  regular 
interchange  of  views  the  bankers  would  be  able  to  improve 
the  general  banking  interests  of  the  State  and  that  this  in 
turn  would  inure  to  the  benefit  of  the  business  interests  of 
the  country. "^^^ 

In  response  to  this  call  sixty-nine  bank  ofiicers  and  bank- 
ers registered  at  the  first  convention.  Since  the  primary 
purpose  of  the  gathering  was  organization,  the  program  was 
very  informal.  John  NoUen  of  Pella  entertained  the  gath- 
ering by  reminiscences  of  earlier  banking,  while  W.  A. 
McHenry  of  Denison  and  others  joined  in  the  discussion. 
Certain  steps  looking  toward  uniformity  in  exchange 
charges  and  other  matters  of  banking  practice  were  dis- 
cussed and  resolutions  passed  relating  to  these  points. 

In  the  constitution  adopted  at  the  first  convention  the 
organization  was  named  the  Iowa  Bankers  Association; 
membership  was  open  to  any  national  or  State  bank,  trust 
company,  savings  bank,  or  banker.  Officers  of  the  Associa- 
tion were  a  president,  first  vice  president,  and  one  vice  pres- 
ident for  each  congressional  district.    This  group  of  officers 

362 


THE  IOWA  BANKERS  ASSOCIATION  363 

was  to  be  known  as  the  executive  council  and  was  authorized 
to  appoint  a  secretary,  a  treasurer,  and  other  employees. 
Membership  fees  of  $3  and  annual  dues  of  $2  were  pre- 
scribed. 

Gr.  L.  Tremain  of  Humboldt  was  chosen  president  at  this 
first  meeting ;  "W.  T.  Fenton  of  Ottumwa  was  appointed  the 
first  treasurer;  and  J.  E.  Henriques  of  Marshalltown  was 
named  secretary. '^^*^ 

For  years  President  Tremain  was  a  leading  spirit  in  the 
Association.  He  was  highly  regarded  by  his  colleagues,  as 
is  shown  by  the  following  special  resolution  of  respect  which 
was  recorded  at  the  1918  convention : 

"Whereas,  a  former  President  of  this  Association,  Mr.  George  L. 
Tremaia,  of  Humboldt,  Iowa,  we  are  informed,  has  reached  the 
noble  age  of  three  score  and  twenty,  and  as  we  owe  to  him  the 
thought  and  initiative  which  formed  this  organization. 

Resolved,  That  we  hereby  extend  to  him  our  most  sincere  con- 
gratulations on  the  life  lived  and  the  years  enjoyed  by  him,  and 
our  hopeful  desire  for  a  continuation  of  years  of  happiness.'^^^ 

This  tribute  was  the  last  given  to  Mr.  Tremain  while  he 
was  still  living;  the  1919  convention,  which  convened  at 
Fort  Dodge,  was  called  upon  to  pass  resolutions  to  his 
memory.^^2 

GROWTH  OF  THE  ASSOCIATION 

The  history  of  the  early  years  of  the  Association  is  a 
record  of  disappointments.  At  the  second  annual  meeting, 
held  at  Spirit  Lake,  the  treasurer's  report  showed  sixty- 
seven  members.'^^^  The  attendance  is  reported  elsewhere  as 
forty-five.  In  1900  for  the  first  time  over  two  hundred  dele- 
gates and  visitors  registered  at  an  annual  convention.'^'^^ 

In  those  early  years,  outside  speakers  of  prominence 
could  not  be  secured  for  the  programs.  Men  would  promise 
to  appear  and  then  fail  to  meet  the  appointment.  Even  the 
presidents  of  the  Association  were  frequently  absent.  The 
records  show  that  in  1890,  1891,  and  1892  the  place  of  the 


364  HISTORY   OF    BANKING   IN    IOWA 

president  was  taken  by  the  vice  presidentJ^^  In  his  address 
of  welcome,  delivered  at  the  thirty-second  annual  convention 
held  in  Dubuque  in  1918,  J.  K.  Deming  made  this  statement : 
"Twenty-eight  years  ago  the  Iowa  Bankers  Association 
held  its  Fourth  Annual  Convention  in  this  city.  There  were 
present  about  150  Iowa  bankers,  and  the  occasion  aroused 
so  little  interest  that  the  President  of  the  Association  for- 
got, or  at  least,  failed  to  attend.  So  the  First  Vice-President 
(a  young  fellow  named  Deming)  presided.  "^^^ 

Growth  of  membership  in  the  Association  was  likewise 
very  slow.  In  his  report  at  the  sixth  annual  meeting  J.  M. 
Dinwiddie,  the  Secretary,  speaks  of  his  disappointment  over 
the  slow  growth  of  the  organization.  He  reported  a  mem- 
bership of  284  out  of  950  banks  listed  as  eligible  to  member- 
ship."^^^  In  1897  the  Secretary's  report  showed  only  253 
full  paid  members  of  the  Association.'^^^ 

Throughout  those  early  discouraging  years  the  burden  of 
maintaining  the  interest  of  members  in  the  Association  and 
of  extending  its  life  and  influence  fell  largely  upon  J.  M. 
Dinwiddie  of  Cedar  Rapids,  Secretary  of  the  Association 
from  1888  until  the  appointment  of  a  permanent,  full-time 
Secretary  in  1910.  On  September  26,  1888,  Mr.  Henriques, 
the  first  Secretary,  resigned,  and  Mr.  Dinwiddie  was  chosen 
as  his  successor. '^'^^  In  spite  of  discouragement  and  lack  of 
cooperation  Mr.  Dinwiddie  labored  to  build  up  the  great 
organization  which  now  exists.  In  1890  he  asked  to  be  re- 
lieved of  his  duties  owing  to  his  own  business  responsibili- 
ties and  the  pressure  of  his  work.  The  President  urged  him 
to  stay  by  the  organization  for  fear  that  his  resignation 
would  be  followed  by  that  of  others."^^" 

During  the  early  period  the  salary  paid  the  Secretary  was 
nominal  ;'^^^  the  net  salary  Mr.  Dinwiddie  received  for  more 
than  twenty  years  of  service  was  in  no  way  commensurate 
with  the  service  he  rendered  the  Association.  But  before 
Mr.  Dinwiddie  retired,  his  efforts  had  borne  abundant  fruit 


THE  IOWA  BANKERS  ASSOCIATION  365 

in  the  growth  of  interest,  membership,  and  attendance; 
moreover,  his  colleagues  gave  hearty  recognition  to  his  part 
in  building  up  the  Association.  In  1908  the  President  in  his 
annual  address  in  commending  Mr.  Dinwiddle 's  work  said : 
''For  practically  all  of  its  existence  he  has  served  in  a  most 
thorough,  painstaking  manner  and  done  more  perhaps  to 
build  it  up  than  any  other  one  man".'^^^  ^^  j^ig  retirement 
in  1910  the  convention  passed  a  resolution  commending  him 
for  his  efficient  service  since  1888,  presented  him  with  a  gift, 
and  sent  him  to  the  Los  Angeles  convention  of  the  American 
Bankers  Association  at  the  expense  of  the  Iowa  Associa- 
tion.^^^ 

The  programs  of  the  early  meetings  were  marked  by 
heated  discussion  of  methods  of  handling  business,  the  rates 
of  exchange  to  be  charged,  plans  to  eliminate  the  com- 
petition of  express  companies,  the  evils  of  transacting  busi- 
ness after  banking  hours  and  similar  topics.  The  subject  of 
the  President's  address  at  the  second  meeting  was  "Some 
Mistakes  in  Banking".  Among  those  which  he  enumerated 
were  undue  anxiety  for  business,  unfriendly  competition, 
laxity  regarding  loans  and  discounts,  carrying  overdrawn 
accounts,  allowing  rebate  of  interest  on  paper  paid  before 
maturity  at  the  rate  originally  charged,  and  encouraging 
customers  to  transact  business  after  office  hours. '^^^ 

Beginning  early  in  the  first  decade  of  the  twentieth  cen- 
tury, there  was  a  marked  change  in  the  attitude  of  banks 
toward  one  another  and  the  Association.  Instead  of  a  spirit 
of  suspicion,  there  arose  a  spirit  of  cooperation.  In  the 
cities  the  clearing  houses  brought  the  bankers  together ;  and 
the  sessions  of  the  State  Association  were  well  attended. 
At  Des  Moines  in  1900  only  about  200  registered  for  the  con- 
vention ;  but  when  the  Association  met  there  again  in  1910, 
about  1000  were  in  attendance.  The  registration  at  the 
convention  held  in  Des  Moines  on  June  7,  8,  1921,  was 
2266.'^85    Tjjg  Secretary  in  1897  had  reported  253  fully  paid 


366  HISTORY    OF    BANKING   IN   IOWA 

members.  In  1906  the  Iowa  Association  claimed  to  be  the 
largest  State  association  in  the  United  States  with  a  total 
of  1100  member  banks  out  of  a  possible  1485.^*®  By  1913 
the  number  was  1600.'^*^  On  June  1,  1919,  there  were  1850 
active  members  in  the  Association  out  of  a  possible  1907 
eligible  institutions.  In  addition  there  were  forty-four  as- 
sociate members — including  publishers  of  bank  journals, 
note  brokers,  and  banking  institutions  outside  of  lowa.'^^* 

Instead  of  barren  discussion  or  extended  debates  on  unim- 
portant matters,  the  programs  of  the  Iowa  bankers'  conven- 
tions are  filled  with  addresses  on  public  questions  by  some 
of  America's  most  noted  speakers  and  discussion  of  impor- 
tant financial  issues  by  leading  bankers  or  treasury  officials. 
Not  infrequently  of  late  years  the  President  of  the  Ameri- 
can Bankers  Association  has  attended  the  Iowa  meeting. 
W.  P.  G.  Harding,  Governor  of  the  Federal  Reserve  Board, 
was  a  speaker  at  the  1919  and  1921  conventions. 

SOCIAL  FEATUEES 

After  1892  the  social  side  of  the  Bankers  Association 
meetings  was  provided  for  by  inviting  the  ladies  and  fam- 
ilies of  the  bankers  to  be  present.  There  has  been  an  in- 
creasing number  of  women  registered  at  the  meetings.  At 
Des  Moines  in  1917  out  of  a  total  registration  of  1849  it 
appears  that  418  were  women ;  in  1921  there  were  over  500 
women  present."^^^  During  the  same  convention  at  which  it 
was  voted  to  invite  the  attendance  of  the  ladies,  a  resolution 
was  passed  expressing  the  hope  that  the  cost  of  entertain- 
ment would  not  be  so  increased  that  the  reception  given  to 
the  Association  in  the  future  would  become  a  burden  to  the 
city.  Among  the  features  provided  by  Davenport  in  that 
year  were:  first,  free  use  of  the  Masonic  Temple  for  the 
meetings ;  second,  free  use  of  the  Davenport  Business  Men's 
Association  rooms  for  committee  meetings,  rest,  or  recrea- 
tion ;  third,  a  banquet  at  the  Armory  by  the  bankers  of  Dav- 


THE  IOWA  BANKERS  ASSOCIATION  367 

enport ;  fourth,  free  transportation  on  ferry  boats  and  street 
cars;  fifth,  open  house  at  the  Davenport  Outing  Club;  sixth, 
a  river  excursion;  seventh,  carriages  on  Wednesday  after- 
noon to  visit  the  city  water  works  which  was  said  to  have  the 
largest  filtering  establishment  in  the  world,  the  cities  of 
Davenport,  Eock  Island,  and  Moline,  and  the  United  States 
arsenal  on  Rock  Island,  to  which  convention  badges  served 
as  passes.'^^*' 

This  is  a  typical  example  of  the  social  features  of  the 
annual  conventions.  In  1900  it  was  voted  to  pay  from  the 
treasury  of  the  Association  $200  per  year  toward  the  ex- 
penses of  entertaining  the  Association  ;^^^  and  in  1902,  the 
appropriation  was  raised  to  $500.  In  the  course  of  the  dis- 
cussion it  was  stated  that  the  bankers  of  Cedar  Rapids  had 
paid  out  $1400  for  social  features.'^^^  ^jj  effort  was  made 
in  1912  to  discontinue  this  custom  of  paying  $500  to  the  en- 
tertaining city,  but  the  motion  was  lost.  In  1919  the  amount 
was  fixed  at  $750  henceforth. '^^^  The  honor  of  entertaining 
the  sessions  of  the  Association  has  been  much  sought  after 
by  the  cities  of  the  State  having  facilities  to  entertain  so 
large  a  convention.  Des  Moines  has  most  frequently  been 
chosen  for  the  honor  and  has  been  the  most  popular  place,  if 
the  number  in  attendance  at  the  sessions  is  taken  as  a  stand- 
ard. The  selection  of  Des  Moines,  however,  is  no  doubt  due 
largely  to  the  size  and  central  location  of  the  city. 

Joint  sessions  have  been  held  from  time  to  time  with 
other  organizations.  In  1903  the  Iowa  bankers  met  at 
Davenport;  and  the  Illinois  Association  assembled  at  Rock 
Island  at  the  same  time.  Separate  business  sessions  were 
held,  but  on  July  29th  a  joint  session  was  held  in  Davenport, 
addressed  by  C.  M.  Fowler,  Representative  in  Congress 
from  New  Jersey,  A.  B.  Cummins,  Governor  of  Iowa,  and 
H.  J.  Hamlin,  Attorney  General  of  Illinois."^®^  Joint  ses- 
sions have  also  been  held  in  Des  Moines  and  Waterloo  with 
the  Iowa  Farm  Mortgage  Association,  a  considerable  num- 


368  HISTORY    OF    BANKING    IN    IOWA 

ber  of  whose  members  are  also  members  of  the  Iowa  Bank- 
ers Association.^^^  By  means  of  these  joint  sessions  the 
good  fellowship  characteristic  of  the  Association  has  been 
broadened. 

Among  the  social  features  introduced  at  the  1918  meeting 
was  an  ex-councilmen's  dinner  for  members  of  the  1916-1917 
council.  J.  K.  Deming  was  also  host  to  all  former  presidents 
of  the  Association.^^^ 

OEGANIZATION  AND  MEMBEESHIP 

Membership  in  the  Iowa  Bankers  Association  is  of  two 
kinds,  active  and  associate.  Active  membership  may  in- 
clude any  institution  doing  a  general  banking  business  in  the 
State  of  Iowa.  The  annual  membership  fees  of  the  Associa- 
tion are  $6  for  any  bank  having  a  capital  and  surplus  and 
undivided  profits  of  $35,000  or  less  and  are  graduated  up  to 
$50  for  banks  having  a  working  capital  over  $750,000.  Dues 
are  payable  in  advance  on  the  first  of  January.  The  Secre- 
tary is  authorized  to  draw  a  sight  draft  on  any  member 
delinquent  five  days,  and  after  three  months  delinquency  to 
drop  the  member  from  the  Association.  Associate  members 
consist  of  any  publisher  of  a  bank  journal,  any  dealer  or 
broker  in  bank  stocks,  bonds,  commercial  paper,  or  other 
securities,  or  any  bank  located  outside  of  Iowa.  Associate 
members  pay  annual  dues  of  $15  each. 

Active  and  associate  members  are  entitled  to  representa- 
tion by  one  delegate  at  the  annual  meeting  of  the  Associa- 
tion. Delegates  representing  the  associate  members  are  not 
entitled  to  vote.  Delegates  appointed  by  active  members 
must  be  officers  or  directors  of  the  firm  they  represent,  or 
members  of  a  banking  firm,  or  individuals  doing  business 
as  bankers.  They  can  vote  only  in  person,  no  proxies  being 
allowed. 

The  administrative  officers  of  the  Association  now  consist 
of  a  President,  Vice  President,  Secretary,  and  Treasurer 


THE  IOWA  BANKERS  ASSOCIATION  369 

elected  annually.  With  the  exception  of  the  Secretary,  the 
officers  are  elected  by  the  annual  convention.  The  choice  of 
the  President  has  frequently  been  made  the  subject  of  spe- 
cial resolutions  at  the  group  meetings,  so  that  the  election 
by  the  convention  may  become  a  mere  matter  of  form.  To 
discourage  this  practice  a  resolution  was  passed  in  the  1917 
convention  advising  against  endorsing  candidates  for  the 
various  offices  of  the  Association  except  by  their  own  group. 
This  appears  to  be  carried  out  so  that  now  only  the  home 
group  of  a  candidate  endorses  him.  Election  of  officers  oc- 
curs on  the  last  day  of  the  annual  meeting.  The  President 
presides  at  the  convention  which  closes  his  term  of  office.  A 
complete  roster  of  the  presidents  of  the  Association  to- 
gether with  their  home  cities  when  elected  and  the  place  of 
meeting  of  the  Association  at  which  each  presided  is  given 
in  Table  XVL-^^^ 

FULL-TIME  SECRETABT 

The  constitution  provides  that  no  officer,  except  the 
Secretary,  may  succeed  himself  in  office.  Practically  from 
the  formation  of  the  Association  until  1910  this  position 
was  held  by  J.  M.  Dinwiddle,  who  handled  this  work  in  con- 
nection with  his  duties  as  a  banker  in  Cedar  Rapids.  At 
the  Waterloo  convention  of  1909  a  resolution  was  adopted 
appointing  a  committee  of  three  to  investigate  and  make 
recommendation  concerning  the  advisability  of  having  a 
full-time  secretary.  Based  upon  the  satisfactory  results  at- 
tained in  Missouri,  Illinois,  Wisconsin,  and  Minnesota,  all 
of  which  States  had  had  such  an  officer,  the  committee  re- 
ported in  1910  favoring  the  appointment  of  a  permanent 
secretary  at  a  salary  of  $2400  per  year.  Permanent  quar- 
ters were  to  be  rented  in  Des  Moines  and  a  stenographer 
regularly  employed.  Three  names  were  suggested  by  the 
committee.  The  name  of  Mr.  Dinwiddle  was  not  included  as 
he  could  not  afford  to  give  up  his  business  to  devote  his  full 

24 


370  HISTORY   OF    BANKING   IN   IOWA 

Table  XVI 


Presidents  and  Place  of  Meeting  of  the  Iowa  Bankers 
Association 


President 

Home  City  When 
Elected 

Year 

Place  or  Meeting 

G.  L.  Tremain 

Humboldt 

1887 

Des  Moines 

G.  L.  Tremain 

Humboldt 

1888 

Spirit  Lake 

J.  H.  Branch 

Marengo 

1889 

Cedar  Rapids 

J.  H.  Branch 

Marengo 

1890 

Dubuque 

D.  N.  Cooley 

Dubuque 

1891 

Sioux  City 

John  T.  Remey 

Burlington 

1892 

Davenport 

S.  F.  Smith 

Davenport 

1893 

Council  Bluffs 

W.  A.  McHenry 

Denison 

1894 

Des  Moines 

Simon  Casady 

Des  Moines 

1895 

Storm  Lake 

F.  H.  Helsell 

Sioux  Rapids 

1896 

Marsh  alltown 

J.  K.  Deming 

Dubuque 

1897 

Ottumwa 

Chas.  R.  Hannan 

Coxmcil  Bluffs 

1898 

Mason  City 

C.  H.  McNider 

Mason  City 

1899 

Burlington 

Charles  H.  Martin 

Des  Moines 

1900 

Des  Moines 

E.  D.  Hiixford 

Cherokee 

1901 

Cedar  Rapids 

C.  B.  Mills 

Sioux  Rapids 

]902 

Des  Moines 

Homer  A.  Miller 

Des  Moines 

1903 

Davenport 

L.  F.  Potter 

Harlan 

1904 

Des  Moines 

Ackley  Hubbard 

Spencer 

1905 

Des  Moines 

D.  H.  McKee 

Mediapolis 

1906 

Cedar  Rapids 

John  J.  Large 

Rock  Valley 

1907 

Clinton 

H.  M.  Carpenter 

Monticello 

1908 

Sioux  City 

J.  T.  Brooks 

Hedrick 

1909 

Waterloo 

J.  D.  Easton 

Waterloo 

*L.  E.  Stevens 

Ottumwa 

1910 

Des  Moines 

John  McHugh 

Sioux  City 

1911 

Mason  City 

E.  J.  Curtin 

Decorah 

1912 

Cedar  Rapids 

Chas.  Shade 

Rock  Rapids 

1913 

Des  Moines 

D.  L.  Heinsheimer 

Glenwood 

♦Frank  Epperson 

Eddyville 

1914 

Clinton 

J.  L.  Edwards 

Bm-lington 

1915 

Davenport 

H.  T.  Blackburn 

Des  Moines 

1916 

Waterloo 

George  S.  Parker 

Sioux  City 

1917 

Des  Moines 

S.  M.  Leach 

Adel 

1918 

Dubuque 

J.  H.  Ingwersen 

Clinton 

M.  H.  Calderwood 

Eldridge 

1919 

Fort  Dodge 

J.  H.  McCord 

Spencer 

1920 

Des  Moines 

L.  A.  Andrew 

Ottumwa 

1921 

Des  Moines 

♦Acting  President. 


THE  IOWA  BANKERS  ASSOCIATION  371 

time  to  Association  affairs.  The  report  of  the  committee 
was  adopted  and  in  the  election  the  choice  of  the  convention 
fell  to  P.  W.  Hall,  cashier  of  the  Sheldon  National  Bank.''»« 
Mr.  Hall  resigned  in  1916,  and  Frank  Warner  of  Waterloo 
was  elected  at  a  special  meeting  of  the  Council  held  on 
August  9th  of  that  year  to  fill  the  vacancy.  Mr.  Warner  has 
continued  to  carry  on  the  work  of  Secretary,  his  permanent 
headquarters  being  at  Des  Moines.'^^^  Under  his  able  ad- 
ministration the  Association  has  grown  in  membership  and 
in  the  scope  of  its  activities. 

GEOUP  AND  COUNTY  OEGANIZATIONS 

The  distinctive  feature  of  the  present  organization  is  the 
division  of  the  members  of  the  Association  into  eleven 
groups,  geographically  divided  by  counties.  This  plan  of 
group  organization  was  first  adopted  in  1897;  its  purpose 
is  to  increase  the  membership  of  the  Association,  to  arouse 
interest  in  practical  matters,  and  to  provide  opportunity  to 
discuss  problems  in  small  groups.  The  committee  support- 
ing the  plan  reported  that  it  was  in  successful  operation  in 
several  States,  including  Pennsylvania,  New  York,  Ohio, 
Texas,  and  Missouri.  Opposition  to  the  new  system  was 
based  on  the  plea  that  it  would  kill  the  State  Association  to 
hold  group  meetings.  The  plan  was  adopted  after  pro- 
longed discussion  by  a  vote  of  fifty-two  to  twenty-one.  It 
has  been  modified  from  time  to  time,  but,  on  the  whole,  has 
continued  throughout  to  be  a  source  of  strength  to  the  State 
Association.^^" 

The  system  as  adopted  in  1897  provided  for  nine  groups 
having  their  own  ofiicers,  and  holding  their  own  meetings. 
It  seems  to  have  early  proved  successful,  since  in  the  presi- 
dent's address  of  1900  the  general  scheme  was  commended. 
The  number  of  groups  was  subsequently  increased  from 
nine  to  sixteen,  but  in  1905  this  was  reduced  to  eleven — the 
present  number.^"^    The  Association  by-laws  prescribe  that 


372  HISTORY   OF   BANKING   IN   IOWA 

each  group  shall  hold  at  least  one  meeting  each  year.  One 
of  these  meetings,  known  as  the  annual  meeting,  must  be 
held  not  later  than  May  31st  of  each  year.  What  may  be  the 
practice  in  regard  to  other  meetings  is  not  clear  from  the 
records,  but  in  the  annual  report  of  the  convention  of  the 
State  Association,  reports  of  these  annual  group  meetings 
are  included.  The  sessions  last  only  one  day  and  are  usually 
devoted  to  practical  discussions. 

Group  officers  include  a  chairman,  a  secretary,  a  treas- 
urer, and  an  executive  committee  composed  of  one  repre- 
sentative from  each  county  in  the  district.  Group  chair- 
men are  chosen  for  two  years — the  odd  numbered  groups 
electing  in  the  odd  year  and  the  even  numbered  in  the  even 
year.  The  group  chairmen  with  the  four  officers  elected  by 
the  State  Association  constitute  the  Council  of  Administra- 
tion of  the  State  Association.®**^ 

The  county  association  is  a  new  unit  of  organization 
which  is  being  developed  by  the  Association.  In  his  report 
in  1917  the  Secretary  describes  the  success  of  the  county 
associations  already  formed  and  urges  an  extension  of  this 
type  of  organization.  He  stated  that  before  the  county  de- 
pository associations  were  formed  to  help  float  the  Liberty 
bond  issues,  there  were  only  two  such  associations  in  the 
State — the  Ida  County  Bankers  Association  and  the  Dela- 
ware County  Bankers  Association.  The  Secretary  also 
called  attention  to  the  following  purposes  for  which  a  county 
organization  should  be  maintained :  to  analyze  the  banking 
business  in  that  county  and  mutually  determine  what  in- 
terest shall  be  paid  on  time  deposits,  and  also  what  rate 
shall  be  asked  on  loans;  to  exchange  methods  that  have 
proved  practical  in  reducing  the  cost  of  operation;  to  create 
a  complete  credit  file  for  the  county;  to  make  an  arrange- 
ment for  a  county  clearing  house ;  and  even  to  give  attention 
to  the  question  of  proper  help.^^^ 

In  1918  the  Secretary  reported  the  formation  of  five  or 


THE  IOWA  BANKERS  ASSOCIATION  373 

six  additional  county  bankers  associations.  At  the  annual 
convention  a  resolution  was  passed  commending  these  or- 
ganizations in  the  following  language:  "it  is  the  sense  of 
this  convention  that  the  county  shall  constitute  the  unit  in 
Bankers  Conventions,  in  creating  fellowship  among  bank- 
ers, efficiency  in  banking  methods,  establishing  credit  files 
and  such  other  things  essential  and  beneficial  to  better  bank- 
ing in  Iowa. ' '  The  resolution  then  urged  the  formation  of 
county  associations  and  commended  the  bankers  in  the  coun- 
ties already  organized.  A  year  later  the  Secretary  reported 
that  there  were  only  sixteen  counties  without  associations 
already  organized  or  in  process  of  organization  and  in  1921 
all  of  the  counties  were  reported  as  having  county  bankers 
associations.^"^ 

EELATIONS  WITH  THE  AMERICAN  BANKERS  ASSOCIATION 

In  the  earlier  years  of  the  Iowa  Association  considerable 
dissatisfaction  was  manifested  with  the  American  Bankers 
Association.  It  was  charged  that  that  organization  was 
dominated  by  eastern  men  and  was  unresponsive  to  the 
needs  of  Iowa  bankers.  At  the  State  convention  held  in 
1897  the  formation  of  a  national  association  of  bankers  to 
represent  the  State  associations  was  discussed;  and  it  was 
voted  to  send  delegates  to  a  preliminary  meeting,  if  one 
were  held.  It  was  generally  felt,  however,  that  the  two  or- 
ganizations would  not  be  antagonistic,  and  delegates  should 
be  sent  to  each.^"^ 

Nothing  of  importance  appears  to  have  come  from  the 
movement  for  a  second  national  organization  of  bankers. 
The  relationship  between  the  American  Bankers  Associa- 
tion and  the  Iowa  Bankers  Association  was  gradually  im- 
proved through  closer  cooperation  and  through  the  fact 
that  lowans,  or  former  residents  of  the  State,  became  prom- 
inent in  the  councils  of  the  American  Bankers  Association. 

The  position  of  President  of  the  national  Association  was 


374  HISTORY   OF   BANKING   IN   IOWA 

held  by  George  Reynolds  and  Arthur  Reynolds,  both  looked 
upon  as  Iowa  men,  and  in  their  official  position  they  did 
much  to  promote  more  cordial  feelings.  As  a  result,  the 
bankers  in  Iowa  have  enthusiastically  supported  the  Amer- 
ican Bankers  Association  in  recent  years.  At  the  annual 
State  convention,  a  meeting  of  the  Iowa  members  of  the 
American  Bankers  Association  is  held.  In  March,  1920, 
there  were  nearly  1100  Iowa  members  in  the  American 
Bankers  Association.  The  Iowa  members  at  the  convention 
elect  certain  Iowa  officers  of  the  American  Bankers  Associa- 
tion. These  are  a  vice  president  for  the  State  of  Iowa,  six 
members  of  the  executive  council,  a  member  of  the  nom- 
inating committee  and  an  alternate,  and  vice  presidents  for 
the  trust  company  section,  the  savings  bank  section,  the 
national  bank  section,  and  the  State  bank  section.^^^ 

The  present  organization  of  the  Iowa  bankers,  therefore, 
begins  with  the  county  as  the  unit  of  organization,  next 
comes  the  group  or  district,  then  the  State  Association, 
and  finally  the  American  Bankers  Association. 

ACTIVITIES  ON  BEHALF  OF  MEMBEES 

In  addition  to  the  advantages  the  Association  offers  its 
members  for  an  interchange  of  ideas,  discussion,  personal 
acquaintanceship,  molding  of  correct  policies,  and  the  stimu- 
lating influence  of  personal  contact  at  the  conventions,  there 
are  certain  specific  advantages  which  come  to  member  banks 
even  when  attendance  at  the  convention  is  impossible. 
Among  these  special  activities  carried  on  in  behalf  of  the 
members  are  the  protective  work,  the  time  lock  expert,  the 
insurance  department,  the  legislative  committee,  and  the 
legal  aid. 

Protective  Service: — The  protective  work  was  inaugu- 
rated by  a  resolution  of  the  1897  convention.  In  any  case 
where  a  member  bank  has  been  defrauded,  burglarized,  or 


THE  IOWA  BANKERS  ASSOCIATION  375 

robbed,  the  secretary  is  to  be  notified  at  once  and  the  assist- 
ance of  the  Association  will  be  given  in  detective  work  and 
legal  proceedings.  The  Association  now  retains  the  services 
of  the  Wm.  J.  Burns  international  detective  agency,  whose 
Iowa  representative  has  an  office  in  Des  Moines  near  the 
office  of  the  secretary.  Each  year  he  has  reported  a  con- 
siderable number  of  forgeries,  fraudulent  checks  and  notes, 
burglarizations,  and  hold-ups. 

In  June,  1920,  seven  successful  and  four  unsuccessful 
bank  burglarizations  or  hold-ups  were  reported.  To  check 
this  wave  of  crime  a  new  department  was  established  in 
August  in  cooperation  with  the  State,  E.  C.  Saunders,  a 
special  agent  from  the  Governor's  office,  being  in  charge. 
The  Burns  Agency  is  now  used  primarily  in  ferreting  out 
forgeries  and  fraudulent  checks  and  notes  and  the  new  de- 
partment for  apprehending  bank  robbers.  The  plan  also 
provides  for  a  vigilance  committee  of  not  less  than  four  men 
in  every  town  where  there  is  a  bank.  These  men  are  depu- 
tized under  the  county  sheriff  and  provided  with  arms  and 
ammunition  secured  from  the  War  Department  by  the 
county  bankers  associations. 

In  order  to  further  protect  the  banks  each  county  bankers 
association  was  asked  to  subscribe  $1000  for  the  apprehen- 
sion of  bank  burglars  operating  in  the  county.  The  re- 
sponse of  the  county  associations  has  been  one  hundred  per 
cent  and  some  counties  exceeded  their  $1000  quota.  As  soon 
as  the  local  vigilance  committee  was  organized  the  banks 
were  supplied  with  a  red  window  card  bearing  the  caption 
''$1000  reward"  and  warning  would-be  bank  burglars  to 
beware.  Special  rewards  have  also  been  offered  to  tele- 
phone operators  for  giving  prompt  notification  to  the 
sheriff  and  vigilance  committee. 

The  officers  of  the  Iowa  Bankers  Association  sought  to 
further  strengthen  their  protective  work  by  assisting  in  the 
drafting  and  passage  of  a  bill  creating  a  new  criminal  bu- 


376  HISTORY    OF    BANKING    IN    IOWA 

reau  under  the  Attorney  General's  office.  The  plan  outlined 
by  the  Association's  officers  contemplated  employing  a 
finger  print  expert  and  a  handwriting  expert.  It  was  also 
hoped  to  secure  duplicate  finger  print  files  for  all  county 
sheriffs'  offices  and  also  for  the  chief  of  police  in  cities  of 
over  20,000  population.  The"  law  passed  was  much  more 
general  in  form,  but  authorized  the  bureau  to  provide  an 
adequate  system  of  criminal  identification.  Apparently 
specific  plans  may  now  be  developed  at  the  discretion  of  the 
Attorney  General. 

The  Association  has  already  paid  liberal  rewards  for  the 
apprehension  of  criminals.  About  1902  John  Sundblad  was 
killed  in  the  attempt  to  arrest  safe-blowers  who  tried  to  loot 
the  Greenville  bank  in  Clay  County.  His  family  was  left  in 
straightened  circumstances.  By  voluntary  subscriptions  the 
bankers  of  Iowa  raised  a  fund  of  $4740.50  to  clear  his  home- 
stead and  provide  for  his  wife  and  children.  This  fund  was 
administered  by  trustees  elected  by  the  Iowa  Bankers  As- 
sociation, and  reports  were  made  on  it  for  several  years.  In 
1906  the  trustees  reported  that  nothing  had  been  paid  to  the 
family  for  about  two  years,  that  Mrs.  Sundblad  had  remar- 
ried, and  that  the  plan  was  to  save  the  money  for  the  edu- 
cation of  the  Sundblad  boys.  In  1917  when  the  Association 
voted  to  turn  over  the  fund  to  be  used  for  this  purpose,  the 
report  of  the  trustees  showed  a  balance  of  $6472.61. 

On  March  30,  1921,  a  second  law  enforcing  officer,  J.  K. 
Myers,  was  killed  by  bandits  who  attempted  to  rob  the  First 
National  Bank  of  Stuart.  A  memorial  fund  was  immedi- 
ately authorized  by  the  Council  of  Administration  of  the 
Association.  The  county  bankers  associations  were  each  re- 
quested to  subscribe  $50,  from  which  fund  the  widow  of  Mr. 
Myers  is  to  be  paid  a  life  income  of  $50  per  month.  On  July 
8,  1921,  the  Secretary  reported  subscriptions  received  from 
sixty-five  counties. 

As   a   preventive   measure   the   mutual    assistance    and 


THE  IOWA  BANKERS  ASSOCIATION  377 

greater  efficiency  in  prosecutions  which  is  secured  through 
cooperation  has  unquestionably  deterred  criminals  from 
acting  against  member  banks.  The  willingness  of  the  bank- 
ers to  do  all  in  their  power  for  the  families  of  men  who  have 
lost  their  lives  in  their  service  has  perhaps  made  officers 
more  vigilant  in  apprehending  criminals.  Before  the  more 
recent  developments  in  protective  service  the  Iowa  repre- 
sentative of  the  Wm.  J.  Burns  detective  agency  in  comment- 
ing on  the  comparative  freedom  of  Iowa  banks  from  bur- 
glarizations  said :  ' '  It  is  not  out  of  the  way,  I  am  sure,  to 
lay  the  majority  of  this  record  to  the  constant  vigilance 
which  has  been  maintained  by  this  Protective  Department, 
by  the  circularizations  which  have  emanated  from  your 
State  Secretary's  office,  and  by  the  splendid  co-operation 
that  has  been  extended  to  your  department  by  the  sheriffs 
and  police. ' '  The  Protective  Department  under  Mr.  Saun- 
ders, aided  by  his  staff  and  the  local  vigilance  committees, 
has  already  given  unusually  satisfactory  results.  During 
the  fiscal  year  ending  June  1, 1921,  twenty-two  bank  robbers 
were  apprehended.  Information  was  in  the  hands  of  the  de- 
partment which  it  was  believed  would  secure  the  conviction 
of  men  implicated  in  fifteen  other  robberies.  When  all 
phases  of  the  new  plan  are  fully  in  operation  its  results 
may  be  expected  to  be  even  more  significant.^®''^ 

Time  Lock  Expert : — A  second  activity  carried  on  by  the 
Association  for  the  member  banks  is  the  employment  of  a 
time  lock  expert  to  clean  and  repair  time  locks.  At  the  1904 
convention  a  committee  appointed  by  the  executive  council 
to  look  into  the  cleaning  and  repairing  of  time  locks  re- 
ported that  the  charges  were  ''unreasonable  and  exorbi- 
tant". They  stated  further  that  the  charges  were  very 
irregular  and  that  in  their  opinion  the  members  acting  to- 
gether as  an  Association  could  save  sixty  per  cent.  As  a 
result  of  this  report  J.  W.  Loyer  was  employed  to  clean  time 


378  HISTORY   OF    BANKING   IN   IOWA 

locks  for  the  members  at  $6  each.  One  dollar  of  the  fee  was 
sent  to  the  Secretary  to  serve  as  a  guarantee  fund.  The 
Association  then  guaranteed  that  if  a  banker  had  a  lock-out 
caused  by  any  fault  of  the  time  lock,  bolt  work,  or  automatic 
not  working  properly  it  would  pay  for  the  damages  sus- 
tained from  the  money  in  the  hands  of  the  Secretary.  In  the 
report  for  1906  the  reduction  in  cost  is  estimated  at  from  $4 
to  $9  per  lock. 

Mr.  Loyer  's  work  was  satisfactory,  but  considerable  com- 
plaint arose  over  his  dilatory  methods.  He  was  unable  to 
handle  the  work  alone  and  unwilling  to  employ  an  assistant. 
As  a  result  he  resigned  in  the  fall  of  1911,  and  a  five  year 
contract  was  made  with  F.  E.  Davenport  and  Company  of 
Omaha.  Banks  individually  make  contracts  with  the  com- 
pany, but  at  a  standard  rate  and  with  the  guarantee  of  the 
Iowa  Bankers  Association,  which  in  turn  is  protected  by  a 
surety  company  bond.  In  1918  the  time  lock  committee  re- 
ported that  there  were  730  contracts  in  force  and  that  the 
work  was  entirely  satisfactory.  A  saving  of  twenty-five  per 
cent  in  cost  with  ample  protection  against  lock-outs  was 
cited  as  a  reason  for  urging  more  members  to  take  advan- 
tage of  the  F.  E.  Davenport  and  Company  contract.^"® 

Insurance  Department : — A  third  activity  of  the  Associa- 
tion on  behalf  of  its  members  is  the  provision  for  fidelity  and 
burglary  insurance.  As  a  result  of  dissatisfaction  on  the 
part  of  members  with  the  rates  on  fidelity  and  burglary  in- 
surance, a  committee  was  appointed  to  investigate  the  ad- 
vantages of  having  a  contract  made  by  the  Association  on 
behalf  of  its  members.  This  committee  reported  to  the  1906 
convention  a  provisional  contract  with  the  National  Surety 
Company  of  New  York.  The  agreement  provided  that  the 
Secretary  of  the  Iowa  Bankers  Association  act  as  agent  for 
the  company  to  get  insurance  for  members  of  the  Associa- 
tion.   The  Association  was  not  asked  to  guarantee  any  fixed 


THE  IOWA  BANKERS  ASSOCIATION  379 

amount  of  business  nor  to  become  responsible  for  the  col- 
lection of  premiums,  but  merely  to  agree  to  make  a  thorough 
canvass  of  members  and  to  accept  no  other  agency.  The 
contract  would  grant  the  Association  commissions  on  the 
business  written.  No  member  would  be  obligated  to  use  the 
company. 

The  contract  was  not  accepted  by  the  Association  at  this 
time;  but  in  the  President's  address  in  the  following  year, 
the  adoption  of  the  plan  which  had  been  rejected  in  1906  was 
strongly  urged.  When  the  committee  report  was  again 
called  up  it  was  acted  upon  favorably.  The  only  modifica- 
tion on  the  above  contract  was  that  one-half  of  the  commis- 
sion received  by  the  Association  on  each  premium  would  be 
returned  at  the  end  of  the  fiscal  year  to  the  bank  or  banker 
from  whence  it  originally  came.  This  granting  of  a  rebate 
is  now  forbidden  under  the  State  insurance  law,  so  that 
member  banks  do  not  get  a  lower  rate  on  insurance  written 
through  the  Association.  The  influence  of  the  bankers  asso- 
ciations— State  and  national — has,  however,  been  of  dis- 
tinct advantage  in  securing  better  terms  from  insurance 
companies. 

The  insurance  work  of  the  Association  has  grown  to  be  an 
important  feature  and  a  source  of  considerable  revenue.  In 
1910  the  insurance  in  force  was:  burglary  $1,880,000,  and 
fidelity  $850,000.  One  argument  then  advanced  in  favor  of 
a  permanent  Secretary  was  to  increase  the  revenue  from 
commissions.  There  has  been  a  marked  increase  in  the 
amount  of  business  done,  due  either  to  natural  growth  or  to 
the  Association's  having  a  man  free  to  develop  business.  In 
1910  the  revenue  for  insurance  was  $1842,  in  1918  it  was 
$5164,  and  in  1921  it  was  $12,495.  This  revenue  alone  prac- 
tically covers  the  salary  of  the  secretary  and  the  expenses  of 
his  office.  The  funds  received  from  this  source,  however, 
are  primarily  intended  to  maintain  the  protective  depart- 
ment."'* 


380  HISTORY    OF   BANKING   IN   IOWA 

Legislative  Committee : — A  fourth  activity  undertaken  on 
behalf  of  the  banking  interests  of  the  State  is  that  repre- 
sented by  the  legislative  committee — a  committee  which  has 
been  especially  active  during  the  years  when  the  biennial 
session  of  the  legislature  is  held.  At  such  times  a  program 
of  legislation  applicable  to  the  banking  conditions  in  Iowa 
is  carefully  drawn  up  in  conference  with  the  State  Banking 
Department  and  is  urged  for  passage  in  the  legislature. 
This  program  is  very  broad,  giving  attention  to  the  three 
classes  of  banks  under  State  supervision — State  and  savings 
banks  and  trust  companies.  Protective  measures  dealing 
with  criminal  operations  against  banks  are  also  supported. 
In  addition  the  committee  advocates  measures  which  do  not 
relate  specifically  to  banking  but  in  which  Iowa  bankers 
have  an  interest. 

Among  the  general  bills  supported  by  the  legislative  com- 
mittee in  1917  were  a  county  agent  bill,  a  road  patrol  bill, 
and  a  bill  relating  to  bulk  sales  of  merchandise. 

In  1919  the  various  measures  prepared  for  introduction 
in  the  legislature  included :  a  bill  to  amend  the  present  blue 
sky  law;  a  bill  to  empower  the  Superintendent  of  Banking 
to  decline  to  issue  certificates  of  authority  for  any  banks 
that  do  not  meet  certain  requirements  and  to  prohibit  the 
establishment  of  new  private  banks ;  a  bill  to  make  uniform 
the  reserve  requirements  of  State  and  savings  banks ;  a  bill 
to  make  $25,000  the  minimum  capitalization  of  savings 
banks ;  a  bill  to  authorize  banks  to  make  and  execute  bank- 
ers'  acceptances;  a  bill  to  prohibit  the  secret  assignment  of 
accounts ;  and  a  bill  to  provide  more  examiners,  clerks,  and 
fees  for  the  State  Banking  Department. 

In  addition  to  the  legislative  activities  of  the  committee 
at  the  sessions  of  the  State  legislature,  an  effort  has  been 
made  to  follow  banking  legislation  which  is  being  considered 
by  Congress.  This  work  is  carried  on  primarily  by  the 
American  Bankers  Association  and  is   supported  by  the 


THE  IOWA  BANKERS  ASSOCIATION  381 

Iowa  committee.  In  the  years  1917  and  1918  the  passage  of 
bills  creating  the  War  Finance  Corporation  and  the  Capital 
Issues  Committee  received  their  support.  The  committee 
supported  an  amendment  to  the  Federal  reserve  clearing 
system,  which  would  permit  member  banks  to  charge  on 
checks  cleared  through  the  Federal  reserve  banks.  It  pro- 
tested vigorously  before  Congress  against  the  personal 
credits  act,  against  the  excess  profits  tax,  and  against  the 
guarantee  of  deposits  not  exceeding  $5000  in  national 
banks.*^® 

Opinions  may  be  expected  to  differ  as  to  the  merits  of 
certain  proposed  measures,  but  any  fair-minded  examina- 
tion of  the  legislative  program  of  the  Iowa  bankers  must 
lead  to  the  conclusion  that  the  general  tone  of  their  influence 
is  sound  and  in  the  public  interest.  Conservative  as  a  class 
the  bankers  always  have  been ;  at  times,  doubtless,  they  have 
worked  in  their  own  selfish  interest.  Often,  however,  they 
have  supported  bills  which  would  not  bring  them  any  special 
advantages.  In  every  case  the  program  represents  the  ma- 
jority opinion  of  the  bankers  and  is,  therefore,  not  the  work 
of  any  small  clique. 

Legal  Department : — A  fifth  service  the  Association  ren- 
ders for  its  members  is  the  matter  of  legal  advice.  For  a 
number  of  years  the  Association  retained  an  attorney  for 
the  benefit  of  the  members.  Since  January,  1920,  two  at- 
torneys have  been  retained.  Questions  may  be  submitted 
to  them  upon  any  point'*  all  the  way  from  those  referring  to 
the  administration  of  estates  to  the  assessment  of  taxation 
of  bank  stock  and  to  what  constitutes  negotiable  notes '\ 
After  a  recent  decision  of  the  Supreme  Court  regarding 
what  constituted  a  negotiable  note,  the  Secretary  obtained 
an  opinion  from  the  attorney  upon  a  note  form  which  would 
meet  all  of  the  conditions.  An  Association  bulletin  contain- 
ing the  information  was  issued  and  sent  out  to  all  members 


382  HISTORY   OF   BANKING   IN   IOWA 

without  charge.  During  the  year  1917-1918  an  income  tax 
attorney  was  also  retained  who  looked  after  inquiries  of 
member  banks  at  a  nominal  cost.  The  legal  department 
may  also  represent  the  Association  in  the  prosecution  of 
bank  robbers  when  county  attorneys  or  other  officers  re- 
quest assistance.*" 

ACTIVITIES  FOE  THE  GENEEAL  PUBLIC  WELFAEE 

In  addition  to  the  activities  of  the  Association  on  behalf 
of  its  members,  there  are  standing  committees  maintained  to 
work  for  the  general  public  welfare.  The  work  of  the  Asso- 
ciation in  support  of  agriculture,  commerce,  and  good  roads 
has  already  been  discussed  in  connection  with  the  relations 
of  the  bank  to  the  community.  The  Association  has  carried 
on  propaganda  for  wider  use  of  trade  acceptances;  it  has 
promoted  education  and  training  for  banking,  especially  by 
endorsing  the  work  being  carried  on  by  the  School  of  Com- 
merce of  the  State  University  of  Iowa  and  through  the  In- 
stitute of  Banking,  an  agency  fostered  by  the  American 
Bankers  Association.*^  ^ 

From  a  small  unrepresentative  group  of  less  than  one 
hundred  bankers,  the  Iowa  Association  has  grown  in  thirty- 
five  years  into  an  organization  of  nearly  2000  members  with 
an  influence  commensurate  with  the  importance  of  the  busi- 
ness represented.  Working  out  in  the  open  for  its  own  in- 
terests and  those  of  its  patrons  it  has  done  much  to  dispel 
the  suspicion  formerly  held  for  banking  by  the  mass  of  the 
people.  By  its  definite  contribution  in  service  to  its  mem- 
bers it  has  won  to  the  Association  almost  one  hundred  per 
cent  of  the  Iowa  bankers. 


NOTES    AND    REFERENCES 


383 


NOTES  AND  REFERENCES 

CHAPTEE  I 

1  Salter 's  Iowa :   The  First  Free  State  in  the  Louisiana  Purchase,  p.  11 ; 
Shambaugh'a  History  of  the  Constitution  of  Iowa,  ch.  III. 

2  Hepburn's  Contest  for  Sound  Money,  pp.  113,  154. 
sihe  Iowa  Standard    (Iowa  City),  November  27,  1840. 

4  Wilkie  's  Davenport  Past  and  Present,  p.  91. 

5  The  Iowa  Standard   (Iowa  City),  March  23,  1843. 
^Ihe  Iowa  Standard  (Iowa  City),  May  4,  1843. 

'^  The  Iowa  Standard   (Iowa  City),  March  2,  1843. 

«  The  Iowa  Standard  (Iowa  City),  November  23,  1843. 

9  Dewey 's  Financial  History  of  the  United  States,  p.  227. 

10  Interview  with  H.  J.  Wienicke,  Iowa  City. 

11  Hepburn 's  Contest  for  Sound  Money,  pp.  44,  45,  48. 

12  Sumner's  A  History  of  Banking  in  the  United  States,  p.  330,  in  A  History 
of  Banking  in  All  the  Leading  Nations,  Vol.  I. 

13  The  Iowa  City  Standard,  July  23,  1841;  The  Iowa  Standard  (Iowa  City), 
March  9,  November  23,  1843. 

14  The  name  Loco-f  oco  was  almost  universally  applied  to  the  Democratic 
party  by  its  opponents  in  Iowa  during  the  forties  when  the  Bank  question 
was  the  absorbing  political  issue.  The  term  originated  at  a  political  con- 
vention of  the  New  York  Democrats  held  in  Tammany  Hall  in  1835.  There 
had  been  a  sharp  split  in  the  party  over  the  question  of  banks  and  monopolies 
in  general.  At  an  exciting  moment  in  the  meeting  all  the  lights  were  ex- 
tinguished; but  the  anti-monopolists,  who  had  anticipated  that  some  such 
event  would  occur,  were  supplied  with  loco-foco  matches  and  candles.  The 
room  was  immediately  relighted,  and  thereafter  the  members  of  this  section 

t   of  the  party  were  dubbed  Loco-focos.     At  first  an  epithet  of  contempt,  the 
'  term   Loco-foco   came   eventually  to   be   synonymous  with   Democrat. — Town- 
send 's  A  Handbook  of  United  States  Political  History,  p.  175. 

15  The  Iowa  Standard  (Iowa  City),  March  28,  1844. 
18 Zowo  Capital  Beporter  (Iowa  City),  May  10,  1845. 
17  The  Iowa  Standard  (Iowa  City),  April  6,  1843. 

25  "  385 


386  HISTORY   OF    BANKING   IN   IOWA 

CHAPTER  II 

18  Van  der  Zee's  Early  History  of  Lead  Mining  in  the  Iowa  Country  in  The 
Iowa  Journal  of  History  and  Politics,  Vol.  XIII,  pp,  3-52;  Compendium  of 
United  States  Census,  1840,  pp.  294,  342. 

19  Dowrie's  The  Development  of  BanTcing  in  Illinois,  1817-1863,  in  University 
of  Illinois  Studies  in  the  Social  Sciences,  Vol.  II,  No.  4,  p.  67. 

20  Lou;*  of  the  Territory  of  Wisconsin,  1836-1838,  No.  7,  pp.  27-34. 

21  United  States  Statutes  at  Large,  Vol.  V,  p.  198. 

"2  Laws  of  the  Territory  of  Wisconsin,  1836-1838,  No.  7,  sees.  1,  2,  3,  4, 
pp.  27,  28,  29 ;  United  States  Statutes  at  Large,  Vol.  V,  p.  198. 

23  Laws  of  the  Territory  of  Wisconsin,  1836-1838,  No.  7,  sees.  5,  11,  pp.  29,  31. 

24  Laws  of  the  Territory  of  Wisconsin,  1836-1838,  No.  7,  sees.  5,  7,  8,  13,  22, 
pp.  29,  30,  32,  34. 

^5  Laws  of  the  Territory  of  Wisconsin,  1836-1838,  No.  7,  sees.  4,  9,  19,  20, 
pp.  28,  30,  31,  33,  34;  United  States  Statutes  at  Large,  Vol.  V,  p.  198. 

26  Dewey 's  State  BanTcing  Before  the  Civil  War,  pp.  63-73. 

27  Merritt  's  The  Early  History  of  BanTcing  in  Iowa,  pp.  8,  9. 

28  Journal  of  tTie  House  of  Bepresentatives  of  tlie  Territory  of  Wisconsin, 
1837-1838,  pp.  52,  53. 

29  The  cashier  reported  a  cireulation  of  $11,435,  of  which  $9435  was  in 
post  notes  payable  twelve  months  after  date.  Such  notes  were  very  common 
in  most  sections  of  the  country  before  1837,  being  used  for  the  purpose  of  ex- 
tending circidation.  Many  of  the  States  empowered  their  banks  to  issue  such 
bills.  Although  not  authorized  by  the  charter  of  the  Miners'  Bank  they  were 
not  specifically  prohibited.  Hence  the  issue  of  such  notes  was  not  an  infrac- 
tion of  the  Bank's  charter. — Dewey's  State  BanTcing  Before  tTie  Civil  War, 
pp.  104-107;  Journal  of  the  House  of  Representatives  of  the  Territory  of 
Wisconsin,  1837-1838,  pp.  101-105,  123,  378-381. 

^0  Iowa  News,  December  9,  1837,  as  cited  in  Merritt 's  The  Early  History 
of  BanTcing  in  Iowa,  p.  16. 

31  A  petition  was  presented  to  the  legislature  signed  by  a  large  number  of 
persons  in  Dubuque  which  alleged  gross  violations  of  the  charter  provisions. 
This  statement  made  the  "astounding  revelations"  that  the  greater  part  of 
the  first  installment  of  capital  stock  was  paid  for  by  money  loaned  by  the 
Galena  Branch  of  the  Bank  of  Illinois  and  was  paid  back  immediately  as 
soon  as  the  stock  was  all  taken.  Appended  to  the  petition  was  an  aflidavit 
by  Walter  Lewis  to  the  effect  that  G.  D.  DUlon,  cashier  of  the  bank,  had 
stated  to  him  that  his  testimony  given  in  answer  to  the  questions  asked  by  the 
first  investigating  committee  was  false.     Facts  brought  out  by  later  investi- 


NOTES  AND  REFERENCES  387 

gations  would  tend  to  coniirin  this  statement. — Journal  of  the  House  of  Rep- 
resentatives of  the  Territory  of  Wisconsin,  1837-1838,  p.  349. 

32  Laws  of  the  Territory  of  Wisconsin,  18S6-18S8,  p.  527. 

33  Journal  of  the  Council  of  the  Territory  of  Wisconsin,  June  Session,  1838, 
pp.  245-248. 

3*Merritt's  The  Early  History  of  BanJcing  in  Iowa,  p.  35. 

35  Sumner's  A  History  of  BanTcing  in  the  United  States,  pp.  329,  330,  in  A 
History  of  Banking  in  All  the  Leading  Nations,  Vol.  I. 

3«  The  Iowa  News,  February  10,  1838,  as  cited  in  Merritt  's  The  Early  His- 
tory of  Banking  in  Iowa,  pp.  18-23. 

37  Journal  of  the  Council  of  the  Territory  of  Wisconsin,  June  Session,  1838, 
pp.  245-248;  see  also  Journal  of  the  House  of  Representatives  of  the  Territory 
of  Wisconsin,  1838,  pp.  87-94. 

38  Laws  of  the  Territory  of  Iowa,  1838-1839,  pp.  32-42 
8»  Journal  of  the  House  of  Representatives,  1838,  p.  3. 

*o  Laws  of  the  Territory  of  Iowa,  1838-1839,  pp.  515,  516. 

*i  Journal  of  the  House  of  Representatives,  1838,  pp.  132,  301-303, 

42  The  Iowa  Standard  (Iowa  City),  April  16,  1841* 

43  Journal  of  the  Council,  1842,  p.  100. 

44  Journal  of  the  House  of  Representatives,  1842,  pp.  143,  144,  284. 

45  Journal  of  the  Council,  1842,  pp.  135,  137. 
4«  Journal  of  the  Council,  1842,  pp.  144,  154. 

47  Journal  of  the  House  of  Representatives,  1842,  p.  190. 
*^  Journal  of  the  Council,  1842,  p.  162. 
49  Journal  of  the  House  of  Representatives,  1842,  p.  215. 
'io  Journal  of  the  House  of  Representatives,  1842,  p.  222. 
51  Journal  of  the  Council,  1842,  p.  187. 
02  The  Iowa  Standard  (Iowa  City),  February  5,  1842 
83  The  Iowa  Standard  (Iowa  City),  March  12,  1842. 
i    84  Merritt 's  The  Early  History  of  Banking  in  Iowa,  pp.  61,  62. 
55  Journal  of  the  House  of  Representatives,  1842-1843,  p.  150. 
66  TTie  Iowa  Standard  (Iowa  City),  December  15,  1842. 
87  Journal  of  the  House  of  Representatives,  1842-1843,  p.  86. 
68  Journal  of  the  Hou^e  of  Representatives,  1842-1843,  pp.  150-173. 


388  HISTORY   OF   BANKING   IN   IOWA 

69  Journal  of  the  Council,  1842-1843,  pp.  91,  182,  183. 

«o  Journal  of  the  House  of  Bepresentatives,  1842-1843,  p.  148. 

81  Journal  of  the  House  of  Bepresentatives,  1842-1843,  pp.  209-226 

62  The  Iowa  Standard  (Iowa  City),  February  9,  16,  1843. 

63  Journal  of  the  House  of  Bepresentatives,  1843-1844,  pp.  8,  28. 

6*  Journal  of  the  House  of  Bepresentatives,  1843-1844,  pp.  38,  40,  41,  50. 

65  Journal  of  the  House  of  Bepresentatives,  1843-1844,  pp.  67,  74-79. 

66  Journal  of  the  House  of  Bepresentatives,  1843-1844,  p.  81. 

67  Journal  of  the  Council,  1843-1844,  pp.  73,  75,  77,  81,  82,  95. 

68  Journal  of  the  House  of  Bepresentatives,  1843-1844,  p.  122. 

69  Journal  of  the  Council,  1843-1844,  pp.  104,  105. 

10  The  Iowa  Standard  (Iowa  City),  April  25,  1844;  Address  of  the  Direc- 
tors of  the  Miners'  Bank  of  Dubuque  to  the  People  of  Iowa  in  Execut'>vef, 
Documents,  29th  Congress,  1st  Session,  Vol.  VIII,  pp.  1228-1232. 

Ti/owo  Capital  Beporter  (Iowa  City),  April  27,  1844. 

72  Laws  of  the  Territory  of  Wisconsin,  1836-1838,  No.  7,  sec.  23,  p.  34. 

73  Journal  of  the  House  of  Bepresentatives,  1845,  pp.  13,  48,  49 ;  Journal  of 
the  Council,  1845,  pp.  33,  40,  217-221;  Laws  of  the  Territory  of  Iowa,  1845, 
ch.  31. 

74  In  order  to  enable  the  Territory  to  continue  improvements  on  the  Capitol 
at  Iowa  City,  the  Territorial  Agent,  Col.  Jesse  Williams,  had  been  authorized 
in  1841  to  secure  a  loan  of  an  amount  not  to  exceed  $20,000.  The  security  for 
the  loan  was  to  be  the  unsold  lots  of  Iowa  City.  In  accordance  with  this 
order  Col.  Williams  secured  a  loan  of  $5000  from  the  Miners'  Bank  on  June 
28,  1841,  and  a  second  loan  of  $500  in  September  of  the  same  year.  These 
loans  bore  7  per  cent  interest  and  were  payable  in  New  York  eighteen  months 
after  date. — The  Iowa  City  Standard,  July  30,  1841 ;  Laws  of  the  Territory  of 
Iowa,  1840-1841,  ch.  72;  Journal  of  the  Council,  1842-1843,  pp.  192-196;  Mer- 
ritt  's  The  Early  History  of  Banking  in  Iowa,  pp.  45,  62-64,  108,  109. 

75  Address  of  the  Directors  of  the  Miners '  Bank  of  Dubuque  to  the  People 
of  Iowa  in  Executive  Documents,  29th  Congress,  1st  Session,  Vol.  VIII,  pp. 
1228-1232. 

76  Merritt's  The  Early  History  of  Banking  in  Iowa,  p.  117. 

77  Miners'  Bank  of  Dubuque  v.  United  States,  1  Morris  482. 

78  Miners '  Bank  of  Dubuque  v.  United  States,  1  G.  Greene  553. 

79  Merritt's  The  Early  History  of  Banking  in  Iowa,  p.  117. 


NOTES  AND  REFERENCES  389 

so  Journal  of  the  Kouse  of  Bepresentatives,  1842-1843,  p.  165;  The  Iowa 
Standard  (Iowa  City),  April  16,  1841. 

6^  Journal  of  the  House  of  Bepresentatives,  1843-1844,  p.  85;  and  Chart  of 
the  Politics  of  Members  of  the  Legislative  Assemblies  of  the  Territory  of  Iowa, 
prepared  by  Jacob  Van  der  Zee,  in  the  possession  of  The  State  Historical 
Society  of  Iowa. 

82  Joiro  Capital  Beporter  (Iowa  City),  May  24,  1845. 

CHAPTER  III 

83  Journal  of  the  House  of  Bepresentatives,  1838,  p.  140. 

8*  Journal  of  the  House  of  Bepresentatives,  1841-1842,  pp.  210,  211. 

8B  Journal  of  the  House  of  Bepresentatives,  1845,  pp.  81,  94,  95;  Merritt's  The 
Early  History  of  Banking  in  Iowa,  pp.  101-103. 

86  Laws  of  the  Territory  of  Iowa,  1838-1839,  p.  64. 

87  Shambaugh 's  History  of  the  Constitutions  of  Iowa,  pp.  146,  167,  172. 

88  Shambaugh  's  History  of  the  Constitutions  of  Iowa,  pp.  176,  182,  219-227. 
88  Journal  of  the  Constitutional  Convention,  1844,  pp.  28-30. 

90  Journal  of  the  Constitutional  Convention,  1844,  pp.  89,  90. 

»i  Tfte  Iowa  Standard  (Iowa  City),  October  24,  1844;  Shambaugh 's  Frag- 
ments of  the  Debates  of  the  Iowa  Constitutional  Conventions  of  1844  and  1846, 
pp.  67-70,  81. 

92  Journal  of  the  Constitutional  Convention,  1844,  p.  90 ;  Shambaugh 's  His- 
tory of  the  Constitutions  of  Iowa,  p.  183. 

93  Journal  of  the  Constitutional  Convention,  1844,  p.  107. 

^*^  Journal  of  the  Constitutional  Convention,  1844,  p.  121. 

96  The  Iowa  Standard  (Iowa  City),  November  7,  1844;  Shambaugh 's  Frag- 
ments of  the  Debates  of  the  Iowa  Constitutional  Conventions  of  1844  and  1846, 
pp.  143-147. 

96  Journal  of  the  Constitutional  Convention,  1844,  pp.  151,  184,  199,  200. 

97  Shambaugh 's  History  of  the  Constitutions  of  Iowa,  pp.  254,  255,  271,  283. 

98  Shambaugh 's  History  of  the  Constitutions  of  Iowa,  pp.  287-290. 

99  Shambaugh 's  History  of  the  Constitutions  of  Iowa,  pp.  291,  292. 
^00 Iowa  Capital  Beporter  (Iowa  City),  March  18,  1846. 

101  Shambaugh 's  History  of  the  Constitutions  of  Iowa,  p.  292. 

102  Journal  of  the  Constitutional  Convention,  1846,  pp.  23,  38,  56,  71. 

103  Journal  of  the  Constitutional  Convention,  1846,  pp.  72,  75,  76,  85,  86. 


390  HISTORY   OF   BANKING   IN   IOWA 

104  Journal  of  the  Constitutional  Convention,  1846,  p.  xv. 

105  Jowa  Capital  Reporter  (Iowa  City),  June  3,  1846;  Journal  of  the  Con- 
stitutional Convention,  1846,  p.  86.  Data  relative  to  members  of  the  con- 
vention are  given  in  Shambaugh's  Fragments  of  the  Debates  of  the  Iowa 
Constitutional  Conventions  of  1844  and  1846,  pp.  413-415. 

106  The  Iowa  Standard  (Iowa  City),  July  8,  1846. 
lOT  The  Iowa  Standard  (Iowa  City) ,  July  22,  1846. 

108  Shambaugh's  History  of  the  Constitutions  of  Iowa,  pp.  324-328. 

109  Iowa  Historical  and  Comparative  Census,  1836-1880,  pp.  xiii,  xvi,  xxi,  179- 
181,  187,  188,  189,  196. 

110  Albert  Gallatin,  writing  on  banking  in  the  United  States  in  1841,  stated 
that  "banking  in  America  always  implies  the  right  and  practice  of  issuing 
paper  money  as  a  substitute  for  a  specie  currency." — Callendar's  Selections 
from  the  Economic  History  of  the  United  States,  1765-1860,  p.  596. 

111  Treasury  Report,  August  31,  1852,  cited  in  Sumner's  A  History  of  Bank- 
ing in  the  United  States,  p.  415,  in  A  History  of  Banking  in  All  the  Leading 
Nations,  Vol.  I. 

The  States  prohibiting  banks  were  Florida,  Texas,  Arkansas,  Illinois,  Wis- 
consin, Iowa,  Minnesota,  Oregon,  and  California. 

iizFairall's  Manual  of  Iowa  Politics,  1881,  pp.  17,  18;Merritt's  The  Early 
History  of  Banking  in  Iowa,  p.  129. 

113  The  author  examined  Dillon 's  Iowa  Digest,  1839-1860,  for  cases  pertain- 
ing to  banking;  the  Revision  of  i860;  Greene's  Reports,  "Vols.  I-IV,  covering 
cases  tried  between  1847  and  1854;  and  Iowa  Reports,  Vols.  I-VII,  covering 
cases  tried  between  1855  and  1859. 

114  Pollock's  History  of  Economic  Legislation  in  Iowa,  pp.  110-114. 

115  Code  of  1851,  sees.  2731,  2732,  2733,  2734. 

116  Major  Hoyt  Sherman,  youngest  brother  of  General  William  T.  and  Hon. 
John  Sherman,  came  to  Iowa  in  May,  1848.  He  settled  in  Des  Moines,  where 
he  lived  until  his  death  in  June,  1904.  In  1853  he  built  the  Sherman  Block 
and  there  established  the  following  year  the  bank  of  Hoyt  Sherman  and  Com- 
pany to  do  a  legitimate  banking  and  exchange  business.  This  bank  was 
merged  into  the  Des  Moines  branch  of  the  State  Bank  in  1858,  of  which  branch 
Sherman  was  cashier.  For  more  than  a  half  century  he  was  a  resident  of 
Iowa,  and  his  contribution  to  the  literature  of  early  banking  ia  of  especial 
value. — Andrews's  Pioneers  of  Polk  County,  Iowa,  Vol.  I,  pp.  67,  68;  Sher- 
man's Early  Banking  in  Iowa  in  Annals  of  Iowa  (Third  Series),  Vol.  V,  p.  2. 

117  Manuscript  letter  from  J.  T.  Eemey,  President  of  the  National  State 
Bank,  Burlington,  Iowa,  dated  July  13,  1918. 


NOTES  AND  REFERENCES  391 

^^^  Hawkey e  and  Iowa  Patriot  (Burlington),  November  17,  1842. 

119  From  an  account  of  banking  in  Cedar  Eapids,  by  Dr.  S.  D.  Carpenter,  in 
Brewer  and  Wick's  History  of  Linn  County,  Iowa,  pp.  435-440. 

120  The  History  of  the  First  National  BanJc  in  the  United  States,  pp.  16-18, 
91.     This  is  a  Mstory  of  the  First  National  Bank  of  Davenport,  Iowa. 

121  History  of  Dubuque  County  (Western  Historical  Company,  Chicago, 
1880),  pp.  620,  621. 

122  Dubuque  City  Directory,  1856-1857,  p.  31. 

123  History  of  Lee  County,  Iowa  (S.  J.  Clarke  Publishing  Co.,  Chicago, 
1914),  Vol.  I,  p.  253. 

124  Wolfe's  History  of  Clinton  County,  Iowa,  Vol.  I,  pp.  335,  336. 

125  Eichman's  History  of  Muscatine  County,  Iowa,  Vol.  I,  ch.  20. 

1-^^  History  of  Lee  County,  Iowa  (S.  J.  Clarke  Publishing  Co.,  Chicago, 
1914),  Vol.  I,  p.  255. 

'^-T  Daily  Evening  Beporter  (Iowa  City),  May  28,  August  20,  28,  September 
12,  1856. 

128  An  account  of  banking  in  Cedar  Eapids,  by  Dr.  S.  D.  Carpenter,  in 
Brewer  and  Wick's  History  of  Linn  County,  Iowa,  pp.  435-440. 

The  firm  of  Greene  and  Weare  evidently  did  not  survive  long  for  John  Ely 
says  the  partnership  was  soon  dissolved;  "its  affairs  were  liquidated  and  the 
partners  were  engaged  for  several  years  in  saving  what  could  be  realized  from 
the  wreck". — Address  of  John  S.  Ely,  Coe  College  Founders'  Day,  December 
3,  1914. 

129  Parker's  Iowa  As  It  Is  In  1855,  pp.  262,264. 

130  Andrews 's  Pioneers  of  Polk  County,  Iowa,  Vol.  I,  pp.  56,  57,  69. 

131  Hartman's  History  of  Black  Hawk  County,  Iowa,  Vol.  I,  pp.  215,  247. 

i32Burrell's  History  of  Washington  County,  Iowa,  Vol.  I,  p.  368;  Parker's 
Iowa  As  It  Is  In  1855,  p.  263. 

133  Field  and  Eeed  's  History  of  Pottawattamie  County,  Iowa,  Vol.  I,  pp.  19, 
29. 

134  The  Sioux  City  Journal,  December  27,  1905 ;  The  Sioux  City  Tribune, 
August  11,  1907. 

135  Proceedings  of  the  Second  Annual  Convention  of  the  Iowa  Bankers  As- 
sociation, 1888,  p.  10;  Sherman's  Early  Banking  in  Iowa  in  Annals  of  Iowa 
(Third  Series),  Vol.  V,  p.  2. 

136  An  account  of  banking  in  Cedar  Eapids,  by  Dr.  S.  D.  Carpenter,  in 
Brewer  and  Wick 's  History  of  Linn  County,  lovm,  pp.  435-440 ;  The  Sioux  City 
Tribune,  August  11,  1907. 


392  HISTORY    OF    BANKING    IN    IOWA 

137  Sherman's  Early  Banking  in  Iowa  in  Annals  of  Iowa  (Third  Series),  "Vol. 
V,  pp.  2,  3. 

^36 Daily  Evening  Beporter  (Iowa  City),  August  20,  28,  1856. 

'i3Q  Daily  Evening  Beporter  (Iowa  City),  May  28,  August  20,  28,  September 
12,  1856. 

^*o Daily  Evening  Beporter  (Iowa  City),  May  28,  August  20,  28,  September 
12,  1856;  The  Sioiix  City  Tribune,  August  11,  1907. 

141  Sherman's  Early  BanJcing  in  Iowa  in  Annals  of  Iowa  (Third  Series),  VoL 
V,  p.  3. 

142  Sherman's  Early  BanTcing  in  Iowa  in  Annals  of  Iowa  (Third  Series),  Vol. 
V,  p.  2  et  seq. 

143  BiirreU's  History  of  Washington  County,  Iowa,  Vol.  I,  p.  368. 

144  White's  Money  and  Banking  (Fifth  Edition),  pp.  316-319. 
146  Andrews's  Pioneers  of  Folk  County,  loioa,  Vol.  I,  p.  57. 

146  Dewey 's  State  Banking  Before  the  Civil  War,  p.  100  et  seq. 

i47Aumer'8  Leading  Events  in  Johnson  County  Iowa  History,  Vol.  I,  pp. 
445-447. 

148  Sherman's  Early  Banking  in  Iowa  in  Annals  of  Iowa  (Third  Series),  Vol. 
V,  p.  2  et  seq. 

149  Proceedings  of  the  Seventh  Annual  Convention  of  the  Iowa  Bankers  As- 
sociation, 1893,  p.  77. 

isoBolles's  The  Financial  History  of  the   United  States  from   1789-1860, 
p.  516. 

151  Hepburn 's  A  History  of  Currency  in  the  United  States,  p.  66. 

i52Bolles's  The  Financial  History  of  the   United  States  from  1789-1860, 
p.  516. 

153  Parker's  Iowa  As  It  Is  In  1855,  p.  264;   Sherman's  Early  Banking  in 
Iowa  in  Annals  of  Iowa  (Third  Series),  Vol.  V,  p.  3. 

164  Laws  of  the  Territory  of  Nebraska,  1855,  title  page  and  pp.  55,  225,  249, 
250,  347,  348. 

165  Lathrop  's  Some  Iowa  Bank  History  in  the  Iowa  Historical  Becord,  Vol. 
XIII,  p.  59. 

156  Law*  of  the  Territory  of  Nebraska,  1855-1856,  pp.  177,  178,  202,  203, 
208,  209,  224,  225,  230. 

157  Brewer  and  Wick 's  History  of  Linn  County,  Iowa,  p.  439. 

158  Laws  of  the  Territory  of  Nebraska,  1855-1856,  pp.  177,  178. 

159  iSf ote  Democrat  (Davenport),  June  23,  1856,  as  quoted  in  the  Iowa  City 


NOTES  AND  REFERENCES  393 

Eepublican,  July  6,  1856;  advertisement  in  the  Daily  Evening  Eeporter  (Iowa 
City),  September  12,  1856. 

160  Lathrop  's  Some  Iowa  Banlc  History  in  the  Iowa  Historical  Record,  Vol. 
XIII,  p.  59. 

161  Advertisement  of  Hatch  Brothers  in  the  Iowa  WeeJcly  Bepublican  (Iowa 
City),  February  23,  1859. 

162  The  History  of  the  First  National  Bank  in  the  United  States,  pp.  19-23. 

163  Andrews's  Pioneers  of  Folk  County,  Iowa,  Vol.  I,  p.  57. 

164  Lathrop 's  Some  Iowa  Bank  History  in  the  Iowa  Historical  Record,  Vol. 
XIII,  pp.  59,  60. 

166  Laws  of  the  Territory  of  Nebraska,  1857,  p.  131. 

166  Laws  of  the  Territory  of  Nebraska,  1855-1856,  pp.  37-40. 

167  Laws  of  the  Territory  of  Nebraska,  1857,  pp.  143,  145. 
^^s  Annals  of  Iowa  (Third  Series),  Vol.  V,  pp.  52-55. 

169  Jotro  Weekly  Republican  (Iowa  City),  February  23,  1859. 

170  Sherman's  Early  Banking  in  Iowa  in  Annals  of  Iowa  (Third  Series),  Vol. 
V,  facing  p.  10 ;  Andrews 's  Fioneers  of  Folk  County,  Iowa,  Vol.  I,  p.  254. 

171  Tarbell  v.  A.  J.  Stevens  &  Co.,  7  Iowa  163. 

172  Springer's  History  of  Louisa  County,  Iowa,  Vol.  I,  facing  p.  48. 

173  Aurner  's  Leading  Events  in  Johnson  County  Iowa  History,  Vol.  I,  pp. 
140,  141. 

174  The  Debates  of  the  Constitutional  Convention  of  the  State  of  Iowa,  1857, 
Vol.  I,  pp.  355-358. 

175  The  History  of  the  First  National  Bank  in  the  United  States,  pp.  18,  19. 

176  Price's  The  State  Bank  of  Iowa  in  Annals  of  Iowa  (Third  Series),  Vol.  I, 
pp.  270,  271. 

177  Lathrop 's  Some  Iowa  Bank  History  in  the  Iowa  Historical  Record,  Vol. 
XIII,  p.  60. 

178  Samples  are  on  exhibition  in  the  Iowa  Masonic  Library,  Cedar  Eapids, 
Iowa. 

179  Dewey's  Financial  History  of  the  United  States,  p.  263. 

180  Brewer  and  Wick's  History  of  Linn  County,  Iowa,  p.  439;   The  History 
of  the  First  National  Bank  in  the  United  States,  p.  23. 

181  The  History  of  the  First  National  Bank  in  the  United  States,  pp.  16-23. 
i82Gue's  History  of  Iowa,  Vol.  I,  pp.  353.  354. 


394  HISTORY   OF    BANKING   IN   IOWA 

CHAPTER  V 
183  Shambaugh's  History  of  the  Constitutions  of  Iowa,  pp.  330,  333. 

18*  Shambaugh's  Messages  and"  Proclamations  of  the  Governors  of  Iowa, 
Vol.  I,  pp.  426,  444-447,  465,  466. 

185  Shambaugh's  History  of  the  Constitutions  of  Iowa,  p.  335. 

186  Shambaugh's  History  of  the  Constitutions  of  Iowa,  p.  337. 

187  Mc'Claiii's  The  Constitutional  Convention  and  the  Issues  Before  It,  pp.  14, 
40 ;  Shambaugh  's  History  of  the  Constitutions  of  Iowa,  p.  339. 

188  Journal  of  the  Constitutional  Convention,  1857,  pp.  93-95. 

180  The  Debates  of  the  Constitutional  Convention  of  the  State  of  Iowa,  1857, 
Vol.  I,  pp.  393,  405. 

100  Journal  of  the  Constitutional  Convention,  1857,  pp.  93-95. 

181  The  Debates  of  the  Constitutional  Convention  of  the  State  of  Iowa,  1857, 
Vol.  I,  pp.  345-348,  373-377,  387,  388. 

192  Journal  of  the  Constitutional  Convention,  1857,  p.  158. 

i«s  Journal  of  the  Constitutional  Convention,  1857,  pp.  238,  239,  267,  269, 
271-278. 

19-4  The  Debates  of  the  Constitutional  Convention  of  the  State  of  Iowa,  1857, 
Vol.  II,  p.  786. 

195  Journal  of  the  Constitutional  Convention,  1857,  pp.  275-278. 

196  Constitution  of  Iowa,  1857,  Art.  VIII,  sees.  5-11. 

197  Shambaugh 's  Messages   and  Proclamations  of  the   Governors   of  Iowa, 
Vol.  II,  p.  45. 

198  Journal  of  the  House  of  Representatives,  1858,  pp.  227,  587. 

199  Journal  of  the  Senate,  1858,  pp.  508-510. 

200  Shambaugh 's  Messages  and  Proclamations   of   the   Governors   of  Iowa, 
Vol.  II,  pp.  204,  205. 

201  Laws  of  Iowa,  1870,  ch.  25. 

202  Laws  of  Iowa,  1858,  ch.  114,  sees.  7,  20. 

203  Laws  of  Iowa,  1858,  ch.  114,  sec.  30. 

204  Journal  of  the  House  of  Representatives,  1858,  pp.  535,  536. 

205  Laws  of  Iowa,  1858,  eh.  114,  sees.  11,  30,  31. 

206  Laws  of  Iowa,  1858,  eh.  114,  sees.  10,  22,  25,  26,  44. 

207  Laws  of  Iowa,  1858,  ch.  114,  sees.  1,  3,  5,  16,  17,  18,  20,  21,  23,  35. 

208  Laws  of  Iowa,  1858,  ch.  114,  sees.  15,  16,  28,  29,  30. 


NOTES  AND  REFERENCES  395 

209  Laws  of  Iowa,  1858,  ch.  114,  sees.  41,  43. 

210  Journal  of  the  Souse  of  Bepresentatives,  1858,  p.  517. 

211  Laws  of  Iowa,  1858,  ch.  114,  sec.  1 ;  Journal  of  the  House  of  Bepresenta- 
tives, 1858,  p.  537. 

212  Laws  of  Iowa,  1858,  ch.  114  sees.  33,  36 ;  Journal  of  the  Senate,  1858,  p. 
491;  Laws  of  Iowa,  1858,  ch.  114,  sees.  33,  36,  37,  39. 

213  Journal  of  the  House  of  Bepresentatives,  1858,  pp.  587,  588. 

214  Journal  of  the  Senate,  1860,  p.  36. 

21B  Journal  of  the  Senate,  1860,  pp.  677-679. 

216  Laws  of  the  United  States  Concerning  Money,  Banking,  Loans,  1778-1909, 
in  Senate  Documents,  61st  Congress,  2nd  Session,  Vol.  XXXIII,  p.  362;  Laws 
of  Iowa,  1870,  eh.  25. 

CHAPTER  VI 

217  Dewey 's  State  BanTcing  Before  the  Civil  War,  pp.  33-40 ;  Dowrie  's  The 
Development  of  Banking  in  Illinois,  1817-1863,  in  the  University  of  Illinois 
Studies  in  the  Social  Sciences,  Vol.  II,  No.  4,  pp.  22,  27;  Sumner's  A  History 
of  Banking  in  the  United  States,  pp.  330,  333,  411,  439,  in  A  History  of  Bank- 
ing in  All  the  Leading  Nations,  Vol.  I;  Huntington's  A  History  of  Banking 
and  Currency  in  Ohio  Before  the  Civil  War  in  the  Ohio  Archaeological  and 
Historical  Quarterly,  Vol.  XXIV,  No.  3,  p.  481. 

218  Constitution  of  Iowa,  1857,  Art   VIII,  sees.  4-12. 

^^^  Journal  of  the  Senate,  1858,  pp.  174,  419;  Journal  of  the  House  of  Bep- 
resentatives, 1858,  pp.  227,  600.  The  bill  was  introduced  on  February  6th  and 
passed  by  the  House  on  March  12th. 

220  Shambaugh  's  Messages  and  Proclamations  of  the  Governors  of  Iowa, 
Vol.  II,  p.  204. 

221  Laws  of  Iowa,  1858,  ch.  87,  sec.  51. 

222  Laws  of  Iowa,  1858,  ch.  87,  sees.  51-55. 

223Esarey's  State  Banking  in  Indiana,  1814-1873,  in  the  Indiana  University 
Studies,  Vol.  I,  No.  15,  pp.  251,  255. 

224  Huntington 's  A  History  of  Banking  and  Currency  in  Ohio  Before  the 
Civil  War  in  the  Ohio  Archaeological  and  Historical  Quarterly,  Vol.  XXIV, 
No.  3,  pp.  424,  425. 

225  Huntington's  A  History  of  Banking  and  Currency  in  Ohio  Before  the 
Civil  War  in  the  Ohio  Archaeological  and  Historical  Quarterly,  Vol.  XXIV, 
No.  3,  p.  365. 

226  Cue's  History  of  Iowa,  Vol.  IV,  p.  171. 


396  HISTORY    OF    BANKING   IN   IOWA 

227  Journal  of  the  Senate,  1858,  pp.  334,  356,  362,  364-367,  371,  377,  378. 

228  Clark 's  Samuel  Jordan  Kirkwood,  pp.  ix,  47,  48. 

229  Laws  of  Iowa,  1858,  ch.  87,  sees.  2,  51. 

230  Laws  of  Iowa,  1858,  ch.  87,  sec.  5. 

231  Laws  of  Iowa,  1858,  ch.  87,  sees.  3,  11. 

232  Laws  of  Iowa,  1858,  ch.  87,  sees.  2,  19,  49. 

233  Journal  of  the  Senate,  1858,  p.  374. 

234  Laws  of  Iowa,  1858,  ch.  87,  sees.  18,  21,  42,  48,  49. 

23B  Dewey's  State  BanTcing  Before  the  Civil  War,  pp.  117-120. 

236  Laws  of  Iowa,  1858,  ch.  87,  sees.  20,  22,  42. 

237  Laws  of  Iowa,  1858,  ch.  87,  sees.  23,  26,  28,  34. 

238  Laws  of  Iowa,  1858,  ch,  87,  sees.  24-27. 

239  Laws  of  Iowa,  1858,  ch.  87,  sees.  13,  32,  35. 

2*0  Dewey's  State  Banking  Before  the  Civil  War,  pp.  126-136. 

241  Laws  of  Iowa,  1858,  ch.  87,  sees.  3,  35. 

242  Laws  of  Iowa,  1858,  ch.  87,  sees.  28,  37. 

243  Laws  of  Iowa,  1858,  ch.  87,  sees.  9,  26,  28,  38. 

244  Eecord  of  the  Board  of  Directors  in  the  Records  of  the  Commissioners 
(manuscript  volume),  pp.  53,  98. 

245  Laws  of  Iowa,  1858,  ch.  87,  sec.  23. 

246  Laws  of  Iowa,  1858,  ch.  87,  sec.  28. 

247  Huntington 's  A  History  of  Banking  and  Currency  in  Ohio  Before  the 
Civil  War  in  the  Ohio  Archaeological  and  Historical  Quarterly,  Vol.  XXIV,  No. 
3,  pp.  423-425. 

248  Laws  of  Iowa,  1858,  ch.  87,  sees.  7,  8,  12,  13. 

249  Eecord  of  the  Board  of  Directors  in  the  Records  of  the  Commissioners 
(manuscript  volimie),  pp.  162,  182,  183,  201. 

250  Laws  of  Iowa,  1858,  ch.  87,  sees.  9,  31. 

251  Record  of  the  Board  of  Directors  in  the  Records  of  the  Commissioners 
(manuscript  volume),  pp.  267,  276. 

252  Laws  of  Iowa,  1858,  ch.  87,  sees.  9,  13 ;  Journal  of  the  Senate,  1858,  pp. 
347,  481;  Journal  of  the  House  of  Representatives,  1858,  p.  594. 

253  Laws  of  Iowa,  1858,  ch.  87,  sec.  9. 

254  Record  of  the  Board  of  Directors  in  the  Records  of  the  Commissioners 
(manuscript  volume),  p.  31. 


NOTES  AND  REFERENCES  397 

255  Iowa  WeeTcly  Bepublican  (Iowa  City),  January  5,  1859. 

256  See  Sherman's  The  State  Bank  of  Iowa  in  Annals  of  Iowa  (Third  Series), 
Vol.  V,  pp.  93-116. 

257  Laws  of  Iowa,  1858,  ch.  87,  sec.  6. 

258 Price's  The  State  Bank  of  Iowa  in  Annals  of  Iowa  (Third  Series),  Vol. 
I,  p.  274. 

259  Eecord  of  the  Board  of  Directors  in  the  Records  of  the  Commissioners 
(manuscript  volume),  pp.  132,  144,  150,  et  seq. 

260  Records  of  the  Commissioners  (manuscript  volume),  pp.  1,  2. 

261  Records  of  the  Commissioners  (manuscript  volume),  pp.  3,  4,  6-8,  15. 
262 Eecords  of  the  Commissioners  (manuscript  volume),  pp.  12-19. 

Of  the  eight  towns  chosen,  four — Muscatine,  Keokuk,  Dubuque,  and  Daven- 
port— were  Mississippi  Eiver  towns.  Iowa  City  had  been  the  early  capital, 
Des  Moines  was  then  the  capital.  Oskaloosa  is  located  in  Mahaska  County, 
and  Mount  Pleasant  in  Henry  Coimty.  The  population  of  the  cities  at  the 
census  of  1854  ranged  from  1306  for  Mount  Pleasant  to  6634  for  Dubuque. 
Burlington,  then  the  largest  city  in  the  State,  was  not  admitted  until  the  fol- 
lowing year.  The  western  half  of  the  State  and  the  northern  part,  with  the 
exception  of  Dubuque  on  the  Mississippi  Eiver,  were  not  represented. — Iowa 
Historical  and  Comparative  Census,  1836-1880,  Table  LXXXII. 

263  Eecord  of  the  Board  of  Directors  in  the  Records  of  the  Commissioners 
(manuscript  volume),  pp.  52,  65,  67,  P4,  118,  164,  265. 

264  Eecord  of  the  Board  of  Directors  in  the  Records  of  the  Commissioners 
(manuscript  volume),  pp.  19-25. 

265  Eecord  of  the  Board  of  Directors  in  the  Records  of  the  Commissioners 
(manuscript  volume),  pp.  22,  32,  120. 

266  Eecord  of  the  Board  of  Directors  in  the  Records  of  the  Commissioners 
(manuscript  volume),  pp.  26,  29,  232. 

267  Price's  The  State  Bank  of  Iowa  in  Annals  of  Iowa  (Third  Series),  Vol. 
I,  p.  284. 

268  Eecord  of  the  Board  of  Directors  in  the  Records  of  the  Commissioners 
(manuscript  volume),  pp.  27-29. 

269  Eecord  of  the  Board  of  Directors  in  the  Records  of  the  Commissioners 
(manuscript  volume),  pp.  27,  306. 

270  Eecord  of  the  Board  of  Directors  in  the  Records  of  the  Commissioners 
(manuscript  volume),  pp.  150,  159. 

2^^  Laws  of  Iowa,  1858,  ch.  87,  sec.  4;  Eecord  of  the  Board  of  Directors  in 
the  Records  of  the  Commissioners  (manuscript  volume),  pp.  207,  223,  245. 


398  HISTORY    OF    BANKING    IN   IOWA 

272  Kecord  of  the  Board  of  Directors  in  the  Bccords  of  the  Commissioners 
(manuscript  volume),  pp.  42,  43,  99;  Circulation  Begister  of  the  Iowa  City 
Branch  of  the  State  Banlc  of  Iowa  (manuscript)  in  the  possession  of  The 
State  Historical  Society  of  Iowa. 

273Esarey's  State  Banking  in  Indiana,  1814-1873,  in  the  Indiana  University 
Studies,  Vol.  I,  No.  15,  p.  261. 

274  Eecord  of  the  Board  of  Directors  in  the  Becords  of  the  Commissioners 
(manuscript  volume),  pp.  34,  91,  97,  197-199. 

27B  Record  of  the  Board  of  Directors  in  the  Becords  of  the  Commissioners 
(manuscript  volume),  pp.  122-131. 

276  Record  of  the  Board  of  Directors  in  the  Becords  of  the  Commissioners 
(manuscript  volume),  pp.  247,  248,  258,  277. 

277  Record  of  the  Board  of  Directors  in  the  Becords  of  the  CommissioTiers 
(manuscript  volume),  pp.  98,  153,  179,  231. 

278  Pollock's  State  Finances  in  Iowa  During  the  Civil  War  in  The  Iowa 
Journal  of  History  and  Politics,  Vol.  XVI,  pp.  55-107.     See  especially  pp.  71-73. 

270  Lathrop  's  Some  Iowa  Banlc  History  in  the  Iowa  Historical  Becord,  Vol. 
XIII,  p.  63. 

280  Pollock 's  State  Finances  in  Iowa  During  the  Civil  War  in  The  Iowa 
Journal  of  History  and  Politics,  Vol.  XVI,  p.  100. 

281  Quoted  in  the  Iowa  City  Bepuhlican  (Weekly) ,  September  6,  1865. 
282/o«;a  City  Bepublican  ("Weekly),  March  2,  1864. 

283  Biennial  Beport  of  the  Auditor  of  State,  1859,  p.  16,  1861,  p.  18,  1863, 
p.  21. 

284  Shambaugh  's  Messages  and  Proclamations  of  the  Governors  of  Iowa, 
Vol.  II,  pp.  168,  169. 

280  Record  of  the  Board  of  Directors  in  the  Becords  of  the  Commissioners 
(manuscript  volimie),  pp.  207,  208,  214,  224-226,  228,  233.  For  record  of  suit 
against  the  Bank,  the  author  consulted  Hammond's  Iowa  Digest,  Vol.  II, 
(1860-1866)  covering  the  Supreme  Court  cases. 

286  Record  of  the  Board  of  Directors  in  the  Becords  of  the  Commissioners 
(manuscript  volume),  p.  77. 

287  Record  of  the  Board  of  Directors  in  the  Becords  of  the  Commissioners 
(manuscript  volume),  pp.  78,  81,  165.  See  also  Konde's  BanTcing  in  Iowa 
1857-1874  for  data  on  depreciation  of  bank  notes. 

288  Laws  of  Iowa,  1858,  ch.  87,  sec.  30. 

289  Shambaugh 's  Messages  and  Proclamations  of  the  Governors  of  Iowa, 
Vol.  II,  p.  167. 


f 


NOTES  AND  REFERENCES  399 

290  Shambaugh  's  Messages  and  Proclamations  of  the  Governors  of  Iowa, 
Vol.  II,  p.  274;  Laws  of  Iowa,  1862,  cli.  17,  sec.  2. 

291  Shambaugh  's  Messages  and  Proclamations  of  the  Governors  of  Iowa, 
Vol.  II,  p.  324;  Laws  of  Iowa,  1864,  ch.  43,  sec.  1. 

292  .*aidrews  's  Pioneers  of  Polk  County,  Iowa,  Vol.  I,  pp.  57,  58 ;  interview 
with  H.  J.  Wienicke  at  Iowa  City. 

293iai/;s  of  Iowa,  1S64,  ch.  53;  Gue's  History  of  Iowa,  Vol.  II,  pp.  105-107; 
The  Muscatine  Journal  was  quoted  in  opposition  and  supported  by  the  Iowa 
City  Bepuilican  (Weekly),  April  6,  1864. 

29-t  Hepburn's  A  History  of  Currency  in  the  United  States,  pp.  306-311; 
Laws  of  the  United  States  Concerning  Money,  BanTcing,  and  Loans,  1778-1909, 
in  Senate  Documents,  61st  Congress,  2nd  Session,  Vol.  XXXIII,  p.  362. 

295  Eecord  of  the  Board  of  Directors  in  the  Eecords  of  the  Commissioners 
(manuscript  volume),  pp.  240,  248. 

296  Laws  of  the  United  States  Concerning  Money,  BanTcing,  and  Loans,  1778- 
1909,  in  Senate  Documents,  61st  Congress,  2nd  Session,  Vol.  XXXIII,  pp.  328, 
329. 

29T  Eecord  of  the  Board  of  Directors  in  the  Eecords  of  the  Commissioners 
(manuscript  voliune),  p.  285;  Iowa  City  Bepublican  (Weekly),  November  30, 
1864. 

298  Eecord  of  the  Board  of  Directors  in  the  Eecords  of  the  Commissioners 
(manuscript  volume),  pp.  291-295. 

299  Eecord  of  the  Board  of  Directors  in  the  Eecords  of  the  Commissioners 
(manuscript  volume),  pp.  298,  299. 

300  Eecord  of  the  Board  of  Directors  in  the  Eecords  of  the  Commissioners 
(manuscript  volume),  pp.  303,  304. 

301  Eecord  of  the  Board  of  Directors  in  the  Eecords  of  the  Commissioners 
(manuscript  volume),  p.  308. 

302  Circulation  Eegister  of  the  Iowa  City  Branch  of  the  State  Bank  of  Iowa 
(manuscript)  in  possession  of  the  State  Historical  Society. 

303  Eecord  of  the  Board  of  Directors  in  the  Eecords  of  the  Commissioners 
(manuscript  volume),  p.  291;  Antrobus's  History  of  Des  Moines  County,  Iowa, 
Vol.  I,  p.  358;  Iowa  City  Eepublican  (Weekly),  April  12,  1865;  Andrews's 
Pioneers  of  Polk  County,  Iowa,  Vol.  I,  p.  58;  BurreU's  History  of  Washing- 
Ion  County,  Iowa,  Vol.  I,  p.  371;  Eoberts  and  Moorehead's  History  of  Lee 
County,  Iowa,  p.  254;  Sherman's  The  State  Bank  of  Iowa  in  Annals  of  Iowa 
(Third  Series),  Vol.  V,  p.  109;  Eecord  of  Proceedings,  Branch  of  the  Stato 
Bank  of  Iowa  at  Iowa  City  (manuscript  volume) ,  pp.  152,  153. 

304  Sherman's  The  State  Bank  of  Iowa  in  Annals  of  Iowa  (Third  Series), 
Vol.  V,  pp.   112-115;   Iowa  City  Eepublican    (Weekly),  February   22,   1860, 


400  HISTORY   OF   BANKING   IN   IOWA 

February  20,  1861,  July  23,  1862,  December  23,  1863,  April  20,  1864,  January 
18,  AprH  27,  1865. 

305  Journal  of  the  Senate,  1858,  pp.  367,  380. 

306  Kecord  of  the  Board  of  Directors  in  the  Eecords  of  the  Commissioners 
(manuscript  volume),  pp.  109,  249,  253. 

307  Record  of  the  Board  of  Directors  in  the  Eecords  of  the  Commissioners 
(manuscript  volume),  pp.  Ill,  137-139,  160,  169,  178,  183,  194,  217,  229,  241, 
244,  256,  271,  280,  290,  301. 

308  Becord  of  the  Proceedings,  Branch  of  the  State  Bank  of  Iowa  at  Iowa 
City  (manuscript  volume),  p.  153. 

309  Hepburn 's  A  History  of  Currency  in  the  United  States,  p.  204. 

310  Half  of  the  total  capital  of  the  State  Bank  of  Indiana  was  owned  by 
the  State.  The  bank  went  into  liqiiidation  at  the  expiration  of  its  charter  in 
1859,  "The  state  of  Indiana  realized  a  net  profit  of  $3,500,000 — over  and 
above  the  interest  paid  on  the  bank  bonds — from  the  bank  during  the  twenty- 
five  years  of  its  existence." — White's  Money  and  Banking  (Fifth  Edition), 
p.  336. 

The  State  Bank  of  Ohio  was  "highly  successful." — White's  Money  and 
Banking  (Fifth  Edition),  p.  344. 

The  State  Bank  of  Illinois  began  operations  in  July,  1821.  The  main  of- 
fice was  located  at  Vandalia;  branches  were  established  at  Edwardsville, 
Shawneetown,  Palmyra,  and  Bro^vnsville.  It  was  entirely  owned  by  the  State. 
After  an  vmsuccesful  existence  its  affairs  were  finally  wound  up  about  1835. 
The  loss  to  the  State  was  about  $460,000;  the  loss  to  individuals  was  much 
more. — Dowrie's  The  Development  of  Banking  in  Illinois,  1817-1863,  in  the 
Illinois  University  Studies  in  the  Social  Sciences,  Vok  II,  No.  4,  1913,  pp.  27, 
30,  57,  58;  Knox's  History  of  Banking  in  the  United  States,  p.  716. 

3iiEsarey's  State  Banking  in  Indiana,  1814-1873,  in  the  Indiana  University 
Studies,  Vol.  I,  No.  15,  pp.  263,  264,  288-296. 

312 Price's  The  State  Bank  of  Iowa  in  Annals  of  Iowa  (Third  Series),  Vol.  I, 
p.  293. 

CHAPTER  VII 

313  Barnett  's  State  Banks  and  Trust  Companies  Since  the  Passage  of  the 
National-Bank  Act  in  Senate  Documents,  61st  Congress,  3rd  Session,  Vol.  II, 
p.  11. 

314 Davis's  The  Origin  of  the  National  Banking  System  in  Senate  Docu- 
ments, 61st  Congress,  2nd  Session,  Vol.  XXXV,  pp.  1,  30-33. 

315  Davis's  The  Origin  of  the  National  Banking  System  in  Senate  Docu- 
ments, eist  Congress,  2nd  Session,  Vol.  XXXV,  pp.  11,  14. 


NOTES  AND  REFERENCES  401 

316  Dewey 's  Financial  History  of  the  United  States,  p.  322. 

SIX  Davis's  The  Origin  of  the  National  Banking  System  in  Senate  Docu- 
ments, 61st  Congress,  2nd  Session,  Vol.  XXXV,  pp.  67-82,  101. 

318  Laws  of  the  United  States  Concerning  Money,  Banking,  and  Loans,  1778- 
1909,  in  Senate  Documents,  61st  Congress,  2nd  Session,  Vol.  XXXIII,  pp.  330- 
362;  WMte's  Money  and  Banking  (Fifth.  Edition),  p.  351. 

^^^  History  of  the  First  National  Bank  in  the  United  States,  pp.  31-48; 
Bankers'  Magazine,  Vol.  XVIII,  p.  84  (July,  1863). 

320 Iowa  City  Eepublican  (Weekly),  July  15,  1863,  January  27,  1864. 

321  r/ie  Northwestern  Banker,  June,  1914,  p.  18 ;  Report  of  the  Secretary  of 
the  Treasury  (Finance  Keport),  1863,  pp.  49,  60;  Annual  Report  of  the  Comp- 
troller of  the  Currency,  1916,  Vol.  II,  p.  379. 

322  Davis 's  The  Origin  of  the  National  Banking  System  in  Senate  Docu- 
ments, 61st  Congress,  2nd  Session,  Vol.  XXXV,  pp.  95,  96. 

323  Annual  Report  of  the  Comptroller  of  the  Currency,  1917,  Vol.  II,  pp.  124, 
125. 

324PoUock's  State  Finances  in  Iowa  During  the  Civil  War  in  The  low  A 
Journal  of  History  and  Politics,  Vol.  XVI,  p.  106;  History  of  the  First  Na- 
tional Bank  in  the  United  States,  p.  40;  Iowa  City  Republican  (Weekly), 
February  8,  1865, 

326  Report  of  the  Secretary  of  the  Treasury  (Finance  Report) ,  1876,  pp. 
185,  234. 

326  Biennial  Report  of  the  Auditor  of  State,  1875,  pp.  13-15,  87-90. 

327  Barnett  's  State  Banks  and  Trust  Companies  Since  the  Passage  of  the 
National-Bank  Act  in  Senate  Documents,  61st  Congress,  3rd  Session,  Vol.  II, 
facing  p.  250. 

328  Barnett 's  State  Banks  and  Trust  Companies  Since  the  Passage  of  the 
National-Bank  Act  in  Senate  Documents,  61st  Congress,  3rd  Session,  Vol.  II, 
p.  206. 

329  Barnett 's  State  Banks  and  Trust  Companies  Since  the  Passage  of  the 
National-Bank  Act  in  Senate  Documents,  61st  Congress,  3rd  Session,  Vol.  II, 
p.  11. 

330  Laws  of  Iowa,  1870,  ch.  25. 

331  Revision  of  1860,  sec.  1636.  This  law  was  chapter  129  of  the  laws  passed 
in  1860. 

332  American  Statute  Law,  Vol.  II,  sec.  9500,  p.  572,  quoted  in  Barnett 's 
State  Banks  and  Trust  Companies  Since  the  Passage  of  the  National-Bank  Act 
in  Senate  Documents,  61st  Congress,  3rd  Session,  Vol.  II,  p.  11. 

333  The  Iowa  Department  of  Banking  has  no  statements  on  file  which  were 

26 


402  HISTORY    OF    BANKING    IN    IOWA 

made  to  the  auditor  before  1873. — Manuscript  letter  from  Mrs.  Sarah  G.  French, 
Legal  Clerk,  dated  August  11,  1919. 

334  According  to  a  manuscript  letter  to  the  State  Historical  Society,  dated 
July  26,  1918,  and  signed  by  E.  C.  Youngstrom,  Eecorder  of  Des  Moines 
County,  the  articles  of  incorporation  of  the  Des  Moines  County  Savings  Bank 
are  found  of  record  in  Mortgage  Volume  No.  10,  at  p.  309.  The  articles  of  the 
Merchants  Insurance  Company  and  Burlington  Savings  Bank  are  recorded  in 
Mortgage  Volume  No.  9,  at  p.  602.  The  recorder  states  that  the  articles  con- 
tain seventeen  long  paragraphs  each  and  that  he  was  therefore  unable  to  give 
any  further  information  concerning  them. 

The  original  information  concerning  them  was  found  in  Antrobus's  History 
of  Des  Moines  County,  Iowa,  p.  357.  Mr.  Antrobus  states  that  he  secured  all 
of  his  information  concerning  them,  including  the  date  of  incorporation,  from 
the  records  of  the  county  recorder. 

835  History  of  the  First  National  Bank  in  the  United  States,  p.  39. 

336  Koberts  and  Moorehead  's  History  of  Lee  County,  Iowa,  p.  254. 

337  Downer 's  History  of  Davenport  and  Scott  County,  Iowa,  Vol.  I,  p.  759. 

338  Laws  of  Iowa,  1870,  ch.  172,  sees.  2,  11. 

339  Census  of  Iowa,  1905,  pp.  c,  ci. 

iio  Biennial  Report  of  the  Auditor  of  State,  1873,  pp.  60,  61,  101-104,  1875,. 
pp.  13-15,  87-90. 

s*i  Code  of  1873,  sees.  1570-1576;  Pollock's  History  of  Economic  Legisla- 
tion in  Iowa,  p.  188. 

342  Shambaugh 's  Messages  and  Proclamations  of  the  Governors  of  Iowa, 
Vol.  Ill,  p.  379. 

343  ShambaiTgh's  Messages  and  Proclamations  of  the  Governors  of  Iowa, 
Vol.  IV,  pp.  55,  83-86. 

344  Laws  of  Iowa,  1874,  ch.  60. 

345  Biennial  Beport  of  the  Auditor  of  State,  1875,  pp.  13-15,  87-90. 

CHAPTEE  VIII 

346  Hepburn's  A  History  of  C^irrency  in  the  United  States,  p.  321. 

347  Biennial  Beport  of  the  Auditor  of  State,  1875,  pp.  13,  14. 

348  Hepburn's  A  History  of  Currency  in  the  United  States,  pp.  306-320.  * 

349  Beport  of  the  Comptroller  of  the  Currency,  1917,  Vol.  II,  pp.  36,  357. 

350  Haynes  's  Third  Party  Movements,  pp.  124,  125,  141,  167. 

351  Noyes  's  History  of  the  National-Bank  Currency  in  Senate  Documents, 


NOTES  AND  REFERENCES  403 

61st  Congress,  2nd  Session,  Vol.  XII,  p.  11;  Report  of  the  Camptroller  of  the 
Currency,  1916,  Vol.  II,  p.  154. 

352  Eeport  of  the  Comptroller  of  the  Currency,  1882,  p.  19. 

353  Eeport  of  the  Comptroller  of  the  Currency,  1890,  p.  41. 

354  Report  of  the  Comptroller  of  the  Currency,  1916,  Vol.  II,  p.  379. 

355  Dewey 's  Financial  History  of  the  United  States,  pp.  468-473 ;  Laws  of 
the  United  States  Concerning  Money,  Banking,  and  Loans,  1778-1909,  in  Senate 
Documents,  61st  Coligress,  2ncl  Session,  Vol.  XXXIII,  pp.  446-448. 

356  Biennial  Report  of  the  Auditor  of  State,  1901,  p.  251. 

357  Report  of  the  Comptroller  of  the  Currency,  1920,  Vol.  II,  p.  318. 

^^^  Biennial  Report  of  the  Auditor  of  State,  1875,  pp.  14,  15,  1883,  pp.  89, 
90 ;  Pollock 's  History  of  Economic  Legislation  in  Iowa,  p.  188. 

359  Laws  of  Iowa,  1880,  chs.  153,  208. 

360  Laws  of  Iowa,  1886,  ch.  72. 

361  Laws  of  Iowa,  1894,  chs.  29,  30. 

362  Code  of  1897,  sees.  1863,  1864,  1866,  1867,  1882,  1889. 

363  Laws  of  Iowa,  1902,  ch.  76. 

364  Laws  of  Iowa,  1907,  ch.  91. 

365  Laws  of  Iowa,  1913,  chs.  151,  152,  1915,  chs.  13,  121. 

366  Laws  of  Iowa,  1917,  ch.  189. 

367  Laws  of  Iowa,  1919,  ch.  67. 

368  Laws  of  Iowa,  1919,  ch.  319. 

369  Barnett  's  State  BanTcs  and  Trust  Companies  Since  the  Passage  of  the 
National-BanJc  Act  in  Senate  Documents,  61st  Congress,  3rd  Session,  Vol.  II, 
p.  222. 

370  Special  Report  from  the  BanTcs  of  the  United  States  (April  28,  1909)  in 
Senate  Documents,  61st  Congress,  2nd  Session,  No.  225,  pp.  13,  14. 

371  Annual  Report  of  the  Secretary  of  the  Treasury,  1917,  p.  627. 

372  Laws  of  Iowa,  1874,  ch.  60,  sec.  9. 

373  Biennial  Report  of  the  Auditor  of  State,  1901,  pp.  252,  253. 

374  Supplement  to  Special  Report  from  the  Banks  of  the  United  States  (April 
28,  1909)  in  Senate  Documents,  61st  Congress,  2nd  Session,  No.  225,  Pt.  II, 
p.  85. 

375  Laws  of  Iowa,  1874,  ch.  60,  see.  10,  1906,  eh.  78,  1913,  ch.  149,  1917, 
ch.  364. 

376  Code  of  1897,  ch.  10,  sec.  1860. 


404  HISTORY   OF   BANKING   IN   IOWA 

3'' 1  Laws  of  Iowa,  1915,  ch.  107;  Proceedings  of  the  Twenty-ninth  Annual 
Convention  of  the  Iowa  Bankers  Association,  1915,  p.  29. 

378  Laws  of  Iowa,  1917,  ch.  189. 

379  Laws  of  Iowa,  1919,  ch.  319. 

380  Laws  of  Iowa,  1900,  ch.  67,  1902,  ch.  167,  1913,  ch.  151. 

381  Laws  of  Iowa,  1894,  ch.  29,  1900,  ch.  67,  1917,  ch.  218. 

382  Laws  of  Iowa,  1917,  ch.  357 ;  Proceedings  of  the  Thirty-first  Annual  Con- 
vention of  the  Iowa  BanJcers  Association,  1917,  p.  156. 

383  Code  of  1897,  sec.  1870;  Laws  of  Iowa,  1902,  ch.  76,  1915,  ch.  77. 

384  Laws  of  Iowa,  1888,  ch.  89;  Code  of  1897,  ch.  10,  sec.  1845;  Laws  of  Iowa, 
1913,  ch.  150,  1917,  ch.  238,  1921,  ch.  70. 

3^^  Biennial  Report  of  the  Auditor  of  State,  1916,  Table  No.  4;  Report  of 
the  Comptroller  of  the  Currency,  1916,  pp.  570-581. 

The  Iowa  National  Bank  of  Des  Moines  with  total  resources  of  $10,625,454 
led  the  national  banks  and  was  the  second  largest  bank  in  the  State. 

386  Code  of  1897,  sec.  1889. 

3»T  Special  Report  from  the  Banks  of  the  United  States  (April  28,  1909)  in 
Senate  Documents,  61st  Congress,  2nd  Session,  No.  225,  p.  16;  Biennial  Report 
of  the  Auditor  of  State,  1916,  Pt.  Ill,  p.  3. 

388  Laws  of  Iowa,  1900,  ch.  68,  1904,  ch.  65. 

389  Laws  of  Iowa,  1913,  ch.  152 ;  Proceedings  of  the  Twenty-seventh  Annual 
Convention  of  the  Iowa  Bankers  Association,  1913,  pp.  102-109. 

390  Laws  of  Iowa,  1915,  ch.  121. 

391  From  1877  to  1909  the  figures  were  compiled  for  the  National  Monetary 
Commission  from  the  Homans's  Bankers'  Almanac  and  its  continuations.  Bar- 
nett's  State  Banks  and  Trust  Companies  Since  the  Passage  of  the  National- 
Bank  Act  in  Senate  Documents,  61st  Congress,  3rd  Session,  Vol.  II,  facing  p. 
250.  From  1909  to  1920  the  data  have  been  obtained  from  Eand,  McNally 
and  Company 's  Bankers '  Directory. 

Wherever  possible  the  statistics  have  been  checked  by  reports  of  the  State 
Auditor,  the  Iowa  Bankers  Association,  the  Governor's  messages,  or  other 
sources  from  which  information  may  be  obtained.  There  is  some  variation 
shown  but  the  author's  opinion  is  that  the  error  is  small.— Shambaugh 's  Mes- 
sages and  Proclamations  of  the  Governors  of  Iowa,  Vol.  VI,  p.  154;  Biennial 
Report  of  the  Auditor  of  State,  1916,  pp.  6,  7. 

392  Shambaugh 's  Messages  and  Proclamations  of  the  Governors  of  Iowa, 
Vol.  IV,  p.  364;  Biennial  Report  of  the  Auditor  of  State,  1877,  p.  16,  1879, 
pp.  16,  17. 


NOTES  AND  REFERENCES  405 

393  J&ienniaZ  Report  of  the  Auditor  of  State,  1881,  pp.  14,  15;  Shambaugh's 
Messages  and  Proclamations  of  the  Governors  of  Iowa,  Vol.  V,  p.  172. 

394  Biennial  Eeport  of  the  Auditor  of  State,  1885,  p.  135. 

395  Biennial  Eeport  of  the  Auditor  of  State,  1905,  pp.  xiii,  xiv, 

396  Proceedings  of  the  Fourth  Annual  Convention  of  the  Iowa  BanTcers  As- 
sociation, 1890. 

397  Proceedings  of  the  Fifth  Annual  Convention  of  the  Iowa  BanTcers  As- 
sociation, 1891,  pp.  50-59. 

398  Proceedings  of  the  Twenty-sixth  Annual  Convention  of  the  Iowa  Bankers 
Association,  1912,  pp.  24,  25. 

399  Journal  of  the  Senate,  1915,  p.  778 ;  Proceedings  of  the  Thirty-first  An- 
nual Convention  of  the  Iowa  BanTcers  Association,  1917,  p.  156. 

<oo  Barnett  's  State  BanTcs  and  Trust  Companies  Since  the  Passage  of  the 
National-BanTc  Act  in  Senate  Documents,  6l8t  Congress,  3rd  Session,  Vol.  11, 
pp.  213-219;  Rand,  McNally  and  Company's  BanTcers'  Directory,  January, 
1919,  p.  15. 

•401  Laws  of  Iowa,  1919,  ch.  236.     In  this  discussion  we  have  used  t^'^^^l.  -m 
"private  bank"  to  mean  "those  who,  without  being  incorporated^     /** 
the  business  of  banking."     See  Barnett 's  State  BanTcs  and  Trust;  ^  ^^* 
Since  tTie  Passage  of  the  Nationcl-BanTc  Act  in  Senate  Documents,  G'.aX  con- 
gress, 3rd  Session,  Vol.  II,  p.  10. 

In  the  Iowa  statute  the  language  used  in  defining  priva'„e  banks  nor  the 
purposes  of  the  act  is  as  foUows:  "any  individual,  partnership,  or  unincor- 
porated association,  or  corporation  other  than  national  banking  associations, 
not  subject  to  the  supervision  or  examination  of  the  banking  drpartment. " 

402  Special  Eeport  from  the  BanTcs  of  the  United  States  (Apri"  28,  1909)  in 
Senate  Documents,  61st  Congress,  2nd  Session,  No.  225,  p.  28. 

403  Eeport  of  the  Comptroller  of  the  Currency,  1918,  Vol.  I,  ■>  p.  112,  113. 

404  Proceedings  of  the  Thirty-fourth  Annual  Convention  of  he  Iowa  BanTcers 
Association,  1920,  p.  312. 

*05  Rand,  McNally  and  Company's  BanTce"s'  Directory,  January  1921,  p.  6; 
Federal  Eeserve  Bulletin,  June,  1920,  p.  644'. 

406  Eeport  of  tTie  Comptroller  of  the  Currency,  1918,  Vol.  I,  pp.  112,  113. 

407  Data  for  the  national  banks,  1863-1919,  were  taken  from  the  Eeport  of 
the  Comptroller  of  the  Currency,  Vol.  II,  1919,  pp.  317,  318;  data  on  State 
Banks,  1877-1909,  are  taken  from  Barnett 's  State  BanTcs  and  Trust  Companies 
Since  the  Passage  of  tTie  National-BanTc  Act  in  Senate  Documents,  61st  Con- 
gress, 3rd  Session,  Vol.  II,  table  facing  p.  248;  all  others  are  taken  from  the 
Biennial  Eeports  of  the  Auditor  of  State  and  the  Biennial  Eeport  of  the  Super- 
intendent of  BanJcing,  1918;  the  statistics  for  the  savings  banks  were  all  taken 


406  HISTORY   OF    BANKING   IN   IOWA 

from  the  Biennial  Beports  of  the  Auditor  of  State  and  the  Biennial  Report  of 
the  Superintendent  of  Banking,  1918;  the  State  Auditor's  report  for  1895, 
p.  202,  gives  continuous  statistics,  1875-1895;  the  record  of  the  State  and  sav- 
ings banks  combined  is  found  in  the  Biennial  Report  of  the  Auditor  of  State, 
1895,  p.  204,  and  in  the  Biennial  Report  of  the  Superintendent  of  Banking, 
1918,  p.  17,  where  the  combined  record  for  each  year  since  1891  is  to  be  found; 
trust  company  statistics  are  taken  from  the  biennial  reiJorts  of  the  Auditor 
of  State  for  the  years  1908-1916  and  for  the  years  1917-1918  from  the  Bi- 
ennial  Report  of  the  Superintendent  of  Banking,  1918;  statistics  of  private 
banks,  1877-1909,  are  from  Barnett's  State  Banks  and  Trust  Companies  Since 
the  Passage  of  the  National-Bank  Act  in  Senate  Documents,  61st  Congress,  3rd 
Session,  Vol.  II,  facing  p.  250.  (These  were  compiled  originally  from  Ho- 
mans's  Bankers'  Almanac.)  From  1909-1919  the  private  bank  record  was 
compiled  from  the  January  number  of  Eand,  McNally  and  Company's  Bank- 
ers' Directory  for  each  year. 

^os  Biennial  Report  of  the  Auditor  of  State,  1895,  p.  204;  Biennial  Report 
of  the  Superintendent  of  Banking,  1918,  p.  17;  Abstracts  of  Reports  of  the 
Condition  of  Iowa  Savings  Banks,  State  Banks  and  Trust  Companies,  June  30, 
1919. 

400  Supplement  to  Special  Report  from  the  Banks  of  the  United  States 
(AprU  28,  1909)  in  Senate  Documents,  61st  Congress,  2nd  Session,  No.  225,  Pt. 
II,  7p.  83-89. 

■ii*^  Brigham  's  History  of  Des  Moines  and  Polk  County,  Iowa,  Vol.  I,  p.  540. 

*ii  Towner 's  History  of  Davenport  and  Scott  County,  Iowa,  Vol.  I,  p.  758 ; 
manuscript  letter  from  L.  M.  Ashley,  Assistant  Cashier  of  the  First  National 
Bank  of  ftioux  City,  dated  July  21,  1920. 

412  Brewer  and  Wick's  History  of  Linn  County,  Iowa,  pp.  442,  443. 

413  Eand,  McNally  and  Company 's  Bankers '  Directory  listed  Cedar  Eapids, 
Davenport,  Des  Moines,  Dubuque,  Estherville,  Mason  City,  Muscatine,  Osage, 
Sioux  City,  and  "Waterloo.  A  list  of  towns  having  clearing  houses,  supplied 
by  Frank  "Warner,  Secretary  of  the  Iowa  Bankers  Association,  included  only 
part  of  the  towns  given  in  th-?  Directory  but  added  Clinton,  Council  Bluffs, 
and  Fort  Dodge  to  the  list.  Io\'a  City  was  not  included  in  either  list  but  ex- 
changes made  by  the  banks  of  tr.  -city  are  regularly  reported  in  the  annual 
reports  of  the  Comptroller  of  the •  Currency. — Eand,  McNally  and  Company's 
Bankers'  Directory,  January,  1919,  p.  24;  manuscript  letter  from  Frank  "War- 
ner dated  September  4,  1918. 

414  Manuscript  letter  from  W.  J.  Gilpin,  manager  New  York  Clearing.  House, 
dated  July  20,  1920 ;  Report  of  the  Comptroller  of  the  Currency,  1919,  A^ol.  II, 
p.  830,  1920,  Vol.  II,  pp.  851-853. 

415  The  Northwestern  Banker,  December,  1907,  p.  31;  Sprague's  History  of 
Crises  Under  the  National  Banking  System  in  Senate  Documents,  61st  Congress, 
2nd  Session,  Vol.  XXV,  pp.  434-459. 


NOTES  AND  REFERENCES  407 

*i6  Interview  with  Frank  Warner,  Des  Moines,  Iowa,  July  16,  1921;  Beport 
of  the  Comptroller  of  the  Currency,  1920,  Vol.  II,  pp.  128,  129. 

Tlie  First  National  Bank  of  Ida  Grove  was  formerly  in  voluntary  liquida- 
tion.   The  First  National  Bank  of  Sioux  City  was  restored  to  solvency. 

^-i-T  Biennial  Beport  of  the  Auditor  of  State,  1893,  p.  8d,  1895,  p.  8,  1897, 
p.  10,  1899,  p.  201,  1901,  p.  xi,  1916,  Pt.  Ill,  p.  3;  Biennial  Beport  of  the 
Superintendent  of  Banking,  1918,  pp.  5-17;  Proceedings  of  the  Eighth  Annual 
Convention  of  the  Iowa  Bankers  Association,  1894,  pp.  9,  46;  Proceedings  of 
the  Twenty-fourth  Annual  Convention  of  the  Iowa  Bankers  Association,  1910, 
p.  71;  The  Northwestern  Banker,  January  1905,  p.  13;  letter  from  the  De- 
partment of  Banking,  July  21,  1921. 

418  Proceedings  of  the  Eighth  Annual  Convention  of  the  Iowa  Bankers  As- 
sociation, 1894,  p.  46. 

419  The  Northwestern  Banker,  January,  1905,  p.  13 ;  interview  with  Frank 
Warner,  Des  Moines,  Iowa,  July  16,  1921. 

^'^0  Biennial  Beport  of  the  Auditor  of  State,  1916,  Pt.  Ill,  p.  6;  Biennial 
Beport  of  the  Superintendent  of  Banking,  1918,  pp.  9,  10. 

421  Beport  of  the  Comptroller  of  th"  Currency,  1919,  Vol.  I,  pp.  33,  34,  Vol.  II, 
pp.  524,  525. 

422  Biennial  Beport  of  the  Superintendent  of  Banking,  1918,  p.  5. 

CHAPTER  IX 

423  Laws  of  the  United  States  Concerning  Money,  Banking,  and  Loans,  1773- 
1909,  in  Senate  Documents,  61st  Congress,  2nd  Session,  VoL  XXXIII,  p.  347. 

^^^  Laws  of  the  United  States  Concerning  Money,  Banking,  and  Loans,  1778- 
1909,  in  Senate  Documents,  61st  Congress,  2nd  Session,  Vol.  XXXIII,  pp.  367, 
368. 

425  Holdsworth's  Money  and  Banking,  p.  279. 

426  Laws  of  Iowa,  1858,  ch.  114. 

i^T  Bevision  of  1860,  sec.  1636.  '«* 

428  The  Department  of  Banking  has  no  statements  on  file  in  the  ofl&ce  ^  ^^ 
were  made  to  the  Auditor  of  State  between  the  years  1860  and  1873.-  ''-^ 
script  letter  from  Mrs.  Sarah  G.  French,  Legal  Clerk  of  the  Departmen+  ^jj 
ing,  dated  August  11,  1919. 

429  Code  of  1873,  sees.  1570-1576.  ^,v„, 

430  Biennial  Beport  of  the  Auditor  of  State,  1873,  pp.  60,  61,  10 

431  Laws  of  Iowa,  1874,  ch.  60.  '"5- 

432  Code  of  1897,  sees.  1872-1874;  Laws  of  Iowa,  1921,  chs.  6  ^ 


408  HISTORY    OF    BANKING    IN    IOWA 

433  Proceedings  of  the  Eleventh  Annual  Convention  of  the  Iowa  Bankers  As- 
sociation, 1897,  p.  94. 

*34  Biennial  Report  of  the  Auditor  of  State,  1903,  p.  xiii. 

436  Laws  of  Iowa,  1911,  ch.  83, 

436  Manuscript  letter  from  Mrs.  Sarah  G.  French,  Legal  Clerk  of  the  Depart- 
ment of  Banking,  dated  August  11,  1919. 

437  Biennial  Report  of  the  Auditor  of  State,  1899,  p.  x,  1903,  p.  adii,  1910,  p.  x, 
1912,  p.  xi;  Proceedings  of  the  Twenty-fourth  Annual  Convention  of  the  Iowa 

Bankers  Association,  1910,  p.  74. 

438  The  Des  Moines  Register,  August  7,  1919. 

439  Laws  of  the  United  States  Concerning  Money,  Banking,  and  Loans,  1778- 
1909,  in  Senate  Documents,  61st  Congress,  2nd  Session,  Vol.  XXXIII,  pp.  357, 
358,  415. 

440  Proceedings  of  the  Twenty-second  Annual  Convention  of  the  Iowa  Bankers 
Association,  1908,  pp.  89,  90. 

^^''^  Index-Digest  of  the  Federal  Reserve  Act  and  Amendments  (Second  Edi- 
tion), pp.  42-44. 

442  Holdsworth  's  Money  and  Banking,  p.  280. 

^*3  Index-Digest  of  the  Federal  Reserve  Act  and  Amendments  (Second  Edi- 
tion), p.  42. 

444  Code  of  1873,  sees.  1570-1576 ;  Biennial  Report  of  the  Auditor  of  State, 
1879,  p.  16,  1881,  p.  15,  1885,  p.  135,  1887,  p.  2;  letter  from  W.  O.  Reed,  Deputy 
Superintendent  of  Banking,  July  21,  1921. 

446  Laws  of  Iowa,  1890,  ch.  50. 

446  Laws  of  Iowa,  1904,  ch.  64. 

447  Laws  of  Iowa,  1906,  ch.  81. 

448  Laws  of  Iowa,  1909,  ch.  115. 

449  Laws  of  Iowa,  1915,  ch.  313. 
460  Laws  of  Iowa,  1917,  ch.  40. 

«  Lotos  of  Iowa,  1919,  ch.  335;  Iowa  Bankers  Association  Bulletin  No.  439, 
XIV,  April  26,  1919,  p.  4. 
Hennial  Report  of  the  Auditor  of  State,  1893,  p.  8e;  Laws  of  Iowa,  1894, 

'nial  Report  of  the  Auditor  of  State,  1905,  p.  xiv;  Laws  of  Iowa,  1906, 

from  Mrs,  Sarah  G.  French,  Legal  Clerk  of  the  Department  of 
1  August  11,  1919. 


NOTES  AND  REFERENCES  409 

455  Biennial  Beport  of  the  Auditor  of  State,  1883,  pp.  90,  91,  1885,  pp.  135, 
136;  Shambaugh's  Messages  and  Proclamations  of  the  Governors  of  Iowa,  Vol. 
V,  p.  331. 

456  Pollock 's  History  of  Economic  Legislation  in  Iowa,  p.  167. 

467  Shambaugh  's  Messages  and  Proclamations  of  the  Governors  of  Iowa,  Vol. 
V,  p.  261. 

4B8  Proceedings  of  the  Twenty-sixth  Annual  Convention  of  the  Iowa  Bankers 
Association,  1912,  p.  143 ;  letter  from  Prank  Warner,  July  27,  1921. 

*69  Laws  of  Iowa,  1917,  ch.  40. 

460  The  Northwestern  Banker,  April,  1917,  p.  15,  February,  1920,  p.  36. 

461  Laws  of  Iowa,  1917,  ch.  40. 

462  Laws  of  Iowa,  1919,  cli.  335,  1921,  chs.  209,  340. 

463  Laws  of  Iowa,  1919,  ch.  236 ;  Iowa  Bankers  Association  Bulletin  No.  967, 
p.  10. 

464  Proceedings  of  the  Thirty-second  Annual  Convention  of  the  Iowa  Bankers 
Association,  1918,  p.  164. 

465  The  Des  Moines  Begister,  July,  ls>19;  letter  from  Mrs.  Sarah  G.  French, 
dated  Des  Moines,  September  16,  1920. 

466  It  is  the  practice  of  the  Comptroller  to  reject  a  considerable  number 
of  applications.  During  the  year  ending  October  31,  1918,  applications  for  char- 
ters for  22  banks  were  rejected  and  35  applications  for  charters  were  aban- 
doned.— Beport  of  the  Comptroller  of  the  Currency,  1918,  Vol.  I,  p.  63. 

467  Whitney 's  The  Overdraft  Evil  as  Illustrated  iy  Conditions  in  Iowa  in  The 
American  Economic  Beview,  Vol.  VIII,  pp.  48-61. 

468  Laws  of  Iowa,  1919,  ch.  144. 

CHAPTEE  X 

469  Special  Beport  from  the  Banks  of  the  United  States  (April  28,  1909)  in 
Senate  Documents,  61st  Congress,  2nd  Session,  No.  225,  preface  and  p.  19. 

470  WUlis  's  The  Federal  Beserve,  p.  38 ;  White 's  Money  and  Banking  (Fifth 
Edition),  pp.  453-466,  528. 

471  Congressional  Becord,  63rd  Congress,  Ist  Session,  pp.  4894,  5129. 

472  The  Northwestern  Banker,  January,  1914,  p.  28. 

473  T/ie  Northwestern  Banker,  February,  1914,  p.  31;  Proceedings  of  the 
Twenty-eighth  Annual  Convention  of  the  Iowa  Bankers  Association,  1914,  pp.  36, 
37. 

474  Federal  Beserve  Bulletin,  March,  1920,  p.  308. 


410  HISTORY    OF    BANKING    IN    IOWA 

4"5  Manuscript  letter  from  the  Eeserve  Bank  Organization  Committee,  dated 
March  6,  1914. 

470  Fifth  Annual  Beport  of  the  Federal  Eeserve  Board,  1918,  p.  25. 

*77  The  Federal  Eeserve  Act,  sec.  9. 

478  Cities  in  Iowa  which  have  been  designated  as  reserve  cities  are  Cedar 
Eapids,  Des  Moines,  Dubuque,  and  Sioux  City. — Beport  of  the  Comptroller  of 
the  Currency,  1919,  Vol.  I,  pp.  62,  63. 

^''0  Index-Digest  of  the  Federal  Beserve  Act  and  Amendments  (Second  Edi- 
tion), pp.  16-19,  40,  41. 

480  The  Northwestern  BanTcer,  February,  1914,  p.  25. 

4S1  Laws  of  Iowa,  1915,  eh.  13. 

432  Fifth  Annual  Beport  of  the  Federal  Beserve  Board,  1918,  p.  546. 

483  Proceedings  of  the  Twenty -ninth  Annual  Convention  of  the  Iowa  Bankers 
Association,  1915,  pp.  75-78. 

484  Proceedings  of  the  Thirtieth  Annual  Convention  of  the  Iowa  Bankers  As- 
sociation, 1916,  pp.  25-28. 

485  Proceedings  of  the  Thirtieth  Annual  Convention  of  the  Iowa  Bankers  As- 
sociation, 1916,  pp.  95-107. 

i^^  Fifth  Annual  Beport  of  the  Federal  Beserve  Board,  1918,  pp.  29,  540, 
565,  566;  Sixth  Annual  Beport  of  the  Federal  Beserve  Board,  1919,  p.  39; 
Federal  Beserve  Bulletin,  June,  1921,  p.  673. 

487  Proceedings  of  the  Thirtieth  Annual  Convention  of  the  Iowa  Bankers  As- 
sociation, 1916,  pp.  89-94. 

488  Fourth  Annual  Beport  of  the  Federal  Beserve  Board,  1917,  p.  9. 

489  Fifth  Annual  Beport  of  the  Federal  Beserve  Board,  1918,  pp.  224,  225,  546, 

400  Proceedings  of  the  Thirty-second  Annual  Convention  of  the  Iowa  Bankers 
Association,  1918,  pp.  92,  137-139,  140,  164. 

491  Proceedings  of  the  Thirty-third  Annual  Convention  of  the  Iowa  Bankers 
Association,  1919,  pp.  137-145;  The  Northwestern  Banker,  June,  1921,  p.  42; 
Proceedings  of  the  Thirty-fourth  Annual  Convention  of  the  Iowa  Bankers  As- 
sociation, 1920,  p.  172. 

492  Farm  Land  Values  in  Iowa,  (BulletLn  No.  874  issued  by  the  United  States 
Department  of  Agriculture) ;  Miller 's  Federal  Beserve  Policy  in  The  American 
Economic  Beview,  June,  1921,  pp.  177-206;  Abstracts  Nos.  52-57  of  the  Be- 
ports  of  the  Savings  Banks,  State  Banks,  and  Trust  Companies  of  the  State 
of  Iowa;  Bulletin  of  the  National  City  Bank  of  New  York,  December  20,  1920, 
p.  15;  Beports  to  the  Thirty-fifth  Annual  Convention  of  the  loiva  Bankers  As- 
sociation, 1921,  pp.  48-51;  Sixth  Annual  Beport  of  the  Federal  Beserve  Board, 
1919,  p.  408;  Seventh  Annual  Beport  of  the  Federal  Beserve  Board,  1920,  p.  58. 


NOTES  AND  REFERENCES  411 

493  Laws  of  Iowa,  1919,  chs.  67,  319, 

494  Manuscript  letter  from  D.  H.  Hedrick,  President  of  the  Battle  Creek 
Savings  Bank,  dated  January  7,  1919  (statement  at  the  close  of  business  on 
May  12,  1919) ;  Fifth  Annual  Beport  of  the  Federal  Reserve  Board,  1918,  p. 
543. 

^^^  Index-Digest  of  the  Federal  Reserve  Act  and  Amendments  (Second  Edi- 
tion), pp.  24,  25;  Fourth  Annual  Report  of  the  Federal  Reserve  Board,  1917, 
pp.  23,  24,  181-183;  State  Banks  in  Federal  Reserve  System  in  Senate  Docu- 
ments, 66th  Congress,  2nd  Session,  No.  184. 

480  Personal  interview  with  Mark  E.  Lies,  representing  the  Federal  Reserve 
Bank  of  Chicago,  in  Chicago,  September  12,  1919;  Fifth  Amiual  Report  of  the 
Federal  Reserve  Board,  1918,  pp.  74-77,  557-559;  Federal  Reserve  Bulletin, 
January,  1920,  facing  p.  94;  State  BanJcs  in  the  Federal  Reserve  System  in 
Senate  Documents,  66th  Congress,  2nd  Session,  No.  184;  Preston's  The  Fed- 
eral Reserve  Bonis'  System  of  Par  Collections  in  The  Journal  of  Political 
Economy,  July,  1920,  pp.  565-590;  The  Northwestern  Banker,  April,  1920,  pp. 
37,  52,  June,  1920,  pp.  15,  156,  158;  Annual  Reports  of  the  Thirty-fourth  Con- 
vention of  the  Iowa  Bankers  Association,  1920,  pp.  20,  21. 

49T  Index-Digest  of  the  Federal  Reserve  Act  and  Amendments  (Second  Edi- 
tion), pp.  51,  53,  54. 

498  Fifth  Annual  Report  of  the  Federal  Reserve  Board,  1918,  pp.  24,  25. 

<9^  Index-Digest  of  the  Federal  Reserve  Act  and  Amendments  (Second  Edi- 
tion), pp.  44,  45. 

BOO  Index-Digest  of  the  Federal  Reserve  Act  and  Amendments  (Second  Edi- 
tion), p.  23,  sec.  Ilk. 

eoi  Laws  of  Iowa,  1915,  ch.  121. 

60J  Second  Annual  Report  of  the  Federal  Reserve  Board,  1915,  p.  12. 

608  Fourth  Annual  Report  of  the  Federal  Reserve  Board,  1917,  p.  26. 

io^Fourt\  Annual  Report  of  the  Federal  Reserve  Board,  1917,  pp.  446,  447; 
Fifth  Annunl  Report  of  the  Federal  Reserve  Board,  1918,  p.  570;  Sixth  Annual 
Report  of  the  Federal  Reserve  Board,  1919,  p.  408;  Seventh  Annual  Report  of 
the  Federal  Reserve  Board,  1920,  p.  480. 

50B  Fifth  Annual  Report  of  the  Federal  Reserve  Board,  1918,  pp.  71,  262. 

ii06  Index-Digest  of  the  Federal  Reserve  Act  and  Amendments  (Second  Edi- 
tion), p.  40. 

^07  Index-Digest  of  the  Federal  Reserve  Act  and  Amendments  (Second  Edi- 
tion), pp.  27,  28. 

^08  Index-Digest  of  the  Federal  Reserve  Act  and  Amendments  (Second  Edi- 
tion), p.  26;  Laws  of  Iowa,  1919,  ch.  66. 


412  HISTORY    OF   BANKING   IN    IOWA 

509  Federal  Eeserve  Act,  sec.  27. 

610  Proceedings  of  the  Twenty-ninth  Annual  Convention  of  the  Iowa  Bankers 
Association,  1915,  p.  30. 


CHAPTER  XI 
611  Code  of  1897,  sees.  1890,  1897,  1898. 

fii^ Bulletin  of  the  Bureau  of  Labor  (United  States),  1904,  Vol.  IX,  p.  1492; 
Eosenthal's  Building,  Loan  and  Savings  Associations,  pp.  13-15. 

61^3 Bulletin  of  the  Bureau  of  Labor  (United  States),  1904,  Vol.  IX,  pp.  1491- 
1494;  Ninth  Annual  Report  of  the  Commissioner  of  Labor,  1893,  p.  15;  Ameri- 
can Building  Association  News,  Vol.  XXXVIII,  No.  10,  October  1918,  cover 
page. 

614  Report  of  the  Comptroller  of  the  Currency,  1919,  Vol.  I,  p.  206;  Pro- 
ceedings of  the  Twenty-fourth  Annual  Convention  of  the  United  States  League 
of  Local  Building  and  Loan  Associations,  1916,  p.  13;  Ohio  General  Statis- 
tics, Vol.  II,  1916,  p.  186;  Biennial  Report  of  the  Auditor  of  State,  1916,  Pt. 
IV,  pp.  3-13. 

615 Low*  of  Iowa  (Public),  1872,  chs.  30,  101. 

616  Laws  of  Iowa,  1896,  ch.  85. 

617  Biennial  Eeport  of  the  Auditor  of  State,  1897,  pp.  13-20,  161-257. 

618  Ninth  Annual  Beport  of  the  Commissioner  of  Labor,  1893,  pp.  97-101 ; 
Biennial  Beport  of  the  Auditor  of  State,  1918,  Pt.  Ill,  pp.  10,  11. 

519  Ninth  Annual  Beport  of  the  Commissioner  of  Labor,  1893,  pp.  338,  339. 

520  Table  compiled  from  the  biennial  reports  of  the  Auditor  of  State,  1897- 
1918;  Eeport  of  the  Comptroller  of  the  Currency,  1919,  Vol.  I,  p.  206. 

621  Ninth  Annual  Beport  of  the  Commissioner  of  Labor,  1893,  pp.  14,  15. 

622 Bulletin  of  the  Bureau  of  Labor  (United  States),  1904,  Vol.  IX,  pp.  1499, 
1500. 

623  Code  of  1897,  sec.  1890. 

524  Biennial  Beport  of  the  Auditor  of  State,  1918,  Pt.  Ill,  p.  3. 

625  Biennial  Beport  of  the  Auditor  of  State,  1897,  pp.  252-254. 

626  Adair's  The  Growth  of  the  Building  and  Loan  Associations  of  Nebraska 
in  the  Proceedings  of  the  Iowa  Building  and  Loan  League,  1917,  pp.  75-81. 

627  Gilmore  's  Building  and  Loan  Associations  of  the  United  States,  Their 
Usefulness  and  Mission  in  the  Proceedings  of  the  Iowa  Building  and  Loan 
League,  1916,  pp.  22-29;  manuscript  letter  of  John  L.  Bleakly,  dated  January 
14,  1919. 


NOTES  AND  REFERENCES  413 

528  Laws  of  Iowa,  1896,  ch.  85. 

529  Laws  of  Iowa,  1900,  ch.  69. 

530  Code  of  1897,  sees.  1891,  1892,  1898;  Laws  of  Iowa,  1921,  ch.  258. 

531  Biennial  Beport  of  the  Auditor  of  State,  1918,  Pt.  Ill,  pp.  12,  13 ;  Ninth 
Annual  Beport  of  the  Commissioner  of  Labor,  1893,  pp.  297-299. 

fis^ Bulletin  of  the  Bureau  of  Labor  (United  States),  1904,  Vol.  IX,  pp.  1504- 
1511;  Haymaker's  Some  Features  of  Building  Association  Evolution  in  the 
Proceedings  of  the  Iowa  Building  and  Loan  League,  1917,  pp.  28-47. 

633  McKay's  The  Building  and  Loan  Movement  in  the  United  States  in 
Moulton's  Principles  of  Money  and  Banking,  p.  358;  Biennial  Beport  of  the 
Auditor  of  State,  1918,  Pt.  Ill,  pp.  7,  13. 

534  Ninth  Annual  Beport  of  the  Commissioner  of  Labor,  1893,  pp.  97-101. 

535  Interview  with  F.  D.  DenUnger,  Secretary  of  the  Perpetual  Savings  and 
Loan  Association  of  Cedar  Eapids. 

536  McKay's  The  Building  and  Loan  Movement  in  the  United  States  in 
Moulton's  Principles  of  Money  and  Banking,  p.  358. 

^^T  Code  of  1897,  sec.  1902;  Supplement  to  the  Code  of  Iowa,  1913,  see. 
1898-c. 

638  Articles  of  Incorporation  of  the  Perpetual  Savings  and  Loan  Association 
of  Cedar  Bapids,  Iowa,  Art.  VII;  Articles  of  Incorporation  of  the  Waterloo 
Building  and  Loan  Association  of  Waterloo,  Iowa,  Art.  V. 

639  Laws  of  Iowa,  1921,  ch.  269. 

540  Biennial  Beport  of  the  Auditor  of  State,  1918,  Pt.  Ill,  pp.  8,  9. 

541  Facts  concerning  Des  Moines,  Cedar  Eapids,  and  Waterloo  associations 
obtained  through  interviews  and  personal  letters. 

542  Ninth  Annual  Beport  of  the  Commissioner  of  Labor,  1893,  p.  307. 

643  Supplement  to  the  Code  of  Iowa,  1913,  sec.  1903-a. 

644  Constitutions  of  the  Perpetual  Savings  and  Loan  Association  of  Cedar 
Rapids,  the  Waterloo  Building  and  Loan  Association,  the  Home  Building  and 
Loan  Association,  and  the  Perpetual  Building  and  Loan  Association  of  Water- 
loo. 

5*^^  Bulletin  of  the  Bureau  of  Labor  (United  States),  1904,  Vol.  IX,  pp. 
1528-1534. 

546  Articles  of  Incorporation  of  the  Perpetual  Savings  and  Loan  Association 
of  Cedar  Bapids,  Iowa,  Art.  IX. 

547  Articles  of  Incorporation  of  the  Waterloo  Building  and  Loan  Association 
of  Waterloo,  Iowa,  Art.  VII;  Articles  of  Incorporation  of  the  Perpetual  Build- 
ing and  Loan  Association  of  Waterloo,  Art.  XIX;  Articles  of  Incorporation 
of  the  Home  Building  and  Loan  Association  of  Waterloo,  Art.  VII. 


414  HISTORY    OF    BANKING    IN    IOWA 

6<8  Supplement  to  the  Code  of  Iowa,  1913,  sec.  1903-b. 

649  Code  of  1897,  sec.  1898. 

^'io Bulletin  of  the  Bureau  of  Labor  (United  States),  1904,  pp.  1507,  1508. 

6"  Code  of  1897,  sec.  1898. 

ts2  Proceedings  of  the  Iowa  Building  and  Loan  League,  1917,  pp.  39,  40, 
48,  49 ;  By-laws  of  the  Perpetual  Savings  and  Loan  Association  of  Cedar  Bapids, 
Art.  VI. 

5B3  Ninth  Annual  Report  of  the  Commissioner  of  Labor,  1893,  p.  318. 

554  Laws  of  Iowa,  1896,  ch.  85,  sees.  9,  10. 

»6B  Constitutions  and  by-laws  of  Cedar  Rapids  and  Waterloo  associations. 

B6«  Biennial  Beport  of  the  Auditor  of  State,  1918,  Pt.  Ill,  p.  10. 

057  Supplement  to  the  Code  of  loiva,  1913,  sec.  1893-a. 

558  Proceedings  of  the  Twenty-sixth  Annual  Convention  of  the  United  States 
League  of  Local  Building  and  Loan  Associations,  1918,  pp.  75-84. 

559  Supplement  to  the  Code  of  Iowa,  1913,  sec.  1903-a. 

6«o  Biennial  Beport  of  the  Auditor  of  State,  1916,  Pt.  IV,  p.  7,  1918,  Pt.  Ill, 
p.  7. 

581  Supplement  to  the  Code  of  loiua,  1913,  sec.  1898-d. 

562  Interview  with  F.  D.  Denlinger,  Secretary  of  the  Perpetual  Savings  and 
Loan  Association  of  Cedar  Eapids. 

583  Rosenthal's  Building,  Loan  and  Savings  Associations,  p.  223. 

564  Constitutions  and  by-laws  of  Cedar  Raj^ids  and  Waterloo  associations; 
manuscript  letter  from  John  L.  Bleakly,  dated  January  14,  1919. 

585  Proceedings  of  the  Twenty-seventh  Annual  Convention  of  the  Nebrasica 
League  of  Savings  and  Loan  Associations,  1918,  pp.  7,  8;  manuscript  letter 
from  W.  R.  Adair,  Omaha,  dated  January  14,  1919;  Proceedings  of  the  Iowa 
Building  and  Loan  League,  1916,  p.  26. 

iM  Proceedings  of  the  Iowa  Building  and  Loan  League,  1917,  pp.  37,  38; 
OUo  General  Statistics,  1916,  Vol.  II,  p.  187. 

567  Proceedings  of  the  Twenty-third  Annual  Convention  of  the  United  States 
League  of  Local  Building  and  Loan  Associations,  1915,  pp.  135-141. 

568  Haymaker 's  Some  Features  of  Building  Association  Evolution  in  the 
Proceedings  of  the  Iowa  Building  and  Loan  League,  1917,  pp.  37,  38. 

569  Proceedings  of  the  Twenty-sixth  Annual  Convention  of  the  United  States 
League  of  Local  Building  and  Loan  Associations,  1918,  p.  149;  Proceedings  of 
the  Iowa  Building  and  Loan  League,  1917,  pp.  43,  44,  50,  51. 

570  Code  of  1897,  sees.  1892,  1900,  1901. 


NOTES  AND  REFERENCES  415 

BTi  Eosenthal  's  Building,  Loan  and  Savings  Associations,  p.  120 ;  Bulletin 
of  the  Bureau  of  Labor  (United  States),  1904,  Vol.  IX,  pp.  1535-1537;  by- 
laws of  various  associations. 

572  i^aws  of  Iowa  (Public),  1872,  chs.  30,  101. 

573  z,aws  of  Iowa,  1896,  ch.  85,  sees.  5,  15,  16. 
874  Laws  of  Iowa,  1896,  ch.  85,  sees.  17-26. 

675  Biennial  Beport  of  the  Auditor  of  State,  1897,  p.  19. 

578  Laws  of  Iowa,  1900,  ch.  69,  sec.  13. 

ST  7  Laws  of  Iowa,  1896,  ch.  85,  sees.  6,  7. 

»78  Laws  of  Iowa,  1896,  ch.  85,  sees.  29-31. 

•79  Laws  of  Iowa,  1902,  ch.  77. 

B80  Biennial  Beport  of  the  Auditor  of  State,  1901,  p.  xii. 

'^^'i- Biennial  Beport  of  the  Auditor  of  State,  1903,  p.  xiv;  State  v.  Syndicate 
Land  Company,  142  Iowa  22 ;  Laws  of  Iowa,  1904,  oh.  66. 

^sz Bulletin  of  the  Bureau  of  Labor  (United  States),  1904,  Vol.  IX,  pp.  1571, 
1572. 

883  Laws  of  Iowa,  1896,  ch.  85,  see.  8. 

»s*  Proceedings  of  the  Twenty-third  Annual  Convention  of  the  United  States 
League  of  Local  Building  and  Loan  Associations,  1915,  p.  126;  opinions  of 
Waterloo  and  Cedar  Eapids  bankers  obtained  by  interviews. 

885  Eosenthal 's  Building,  Loan  and  Savings  Associations,  p.  25. 

888  Eosenthal 's  Building,  Loan  and  Savings  Associations,  pp.  25,  26. 

587  American  Building  Association  News,  October,  1918,  Vol.  XXXVIII,  No. 
10,  p.  465. 

Bm  Proceedings  of  the  Iowa  Building  and  Loan  League,  1917,  pp.  45-47,  58. 

^^^  Cleveland  Plain  Dealer,  March  26,  1919;  The  Annalist,  April  21,  1919, 
Vol.  XIII,  No.  327,  p.  405;  Proceedings  of  the  Twenty-seventh  Annual  Con- 
vention of  the  United  States  League  of  Local  Building  and  Loan  Associations, 
1919,  pp.  64-92,  152-157. 

590  j^aws  of  Iowa,  1876,  ch.  163,  1896,  ch.  85,  sec.  33. 

591  Supplement  to  the  Code  of  Iowa,  1913,  sec.  1326;  Laws  of  Iowa,  1911, 
•hs.  63,  73. 

892  Eosenthal 's  Building,  Loan  and  Savings  Associations,  pp.  39,  40;  Pro- 
ceedings of  the  Twenty-sixth  Annual  Convention  of  the  United  States  League 
of  Local  Building  and  Loan  Associations,  pp.  29-33. 

593  Biennial  Beport  of  the  Auditor  of  State,  1903,  p.  xiv. 


416  HISTORY    OF    BANKING    IN   IOWA 

CHAPTER   XII 

^oi  Proceedings  of  the  Fourth  Annual  Convention  of  the  Farm  Mortgage 
Bankers  Association  of  America,  1917,  p.  12. 

595  Thirteenth  Census  of  the  United  States,  1910,  Vol.  VI,  p.  507;  Census  of 
Iowa,  1915,  p.  643.  Fourteenth  Census  of  the  United  States,  1920,  Bulletin  on 
Agriculture  in  Iowa,  p.  3. 

590  Farm  Land  Values  in  Iowa  (Bulletin  No.  874  issued  by  the  United  States 
Department  of  Agriculture). 

59T  Farm  Land  Values  in  Iowa  (Bulletin  No.  874  issued  by  the  United  States 
Department  of  Agriculture);  Iowa  City  Daily  Citizen,  August  21,  1919;  Pro- 
ceedings of  the  Seventh  Annual  Convention  of  the  Iowa  Farm  Mortgage  Associa- 
tion, 1920,  pp.  25-34. 

598  Wealth,  Debt  and  Taxation,  Special  Report  of  the  Bureau  of  the  Census, 
1913,  Vol.  I,  Pt.  I,  pp.  23,  26. 

599  Fourteenth  Census  of  the  United  States,  1920,  Bulletin  on  Agriculture 
in  Iowa,  p.  3. 

600  Thirteenth  Census  of  the  United  States,  1910,  Vol.  VI,  pp.  508,  509 ; 
Fourteenth  Census  of  the  United  States,  1920,  Bulletin  on  Agriculture  in  Iowa, 
p.  5. 

601  Thirteenth  Census  of  the  United  States,  1910,  Vol.  VI,  pp.  507,  508. 

602  Wight 's  Beport  on  Life  Insurance  Farm  Loan  Investments  in  War  Time, 
August  26,  1918,  p.  11. 

003  Interview  with  F.  C.  Waples,  Secretary  of  the  Iowa  Farm  Mortgage  As- 
sociation, Cedar  Rapids,  July  27,  1919;  manuscript  letter  from  D.  P.  Hogan, 
President  of  the  Federal  Land  Bank  of  Omaha,  dated  September  4,  1919; 
Mortgage  Bankers  vs.  The  Farmers,  by  M.  L.  Corey,  Attorney-Registrar  Fed- 
eral Land  Bank  of  Omaha,  in  The  Northwestern  Banker,  June,  1919,  p.  7 ;  Pro- 
ceedings of  the  Seventh  Annual  Convention  of  the  Iowa  Farm  Mortgage  Asso- 
ciation, 1920,  p.  28. 

604  Maynard  's  Bural  Credits  in  the  United  States,  p.  77,  a  thesis  in  posses- 
sion of  the  Library  of  the  State  University  of  Iowa. 

605  Thirteenth  Census  of  the  United  States,  1910,  Vol.  VI,  p.  507. 

^0^  Index-Digest  of  the  Federal  Reserve  Act  and  Amendments  (Second  Edi- 
tion), pp.  44,  45. 

607  Laws  of  Iowa,  1874,  ch.  60,  see.  9,  1913,  ch.  149,  1917,  ch.  364. 

608  Laws  of  Iowa,  1902,  ch.  76. 

609  Manuscript  letter  from  D.  H.  Hedrick,  dated  July  7,  1919;  interview  with 
F.  C.  Waples,  Cedar  Rapids,  July  27,  1919. 

610  Proceedings  of  the  Fifth  Annual  Convention  of  the  Iowa  Farm  Mortgage 


NOTES  AND  REFERENCES  417 

Association,  1918,  pp.  40-49;  manuscript  letter  from  D.  H.  McKee,  dated  August 
15,  1919. 

611  Manuscript  letter  from  John  W.  Leavitt,  Secretary  and  Treasurer,  Cedar 
Falls  Trust  Company,  dated  July  31,  1920. 

612  Preamble  to  the  constitution  of  the  Iowa  Farm  Mortgage  Association, 
manuscript  in  the  possession  of  the  Secretary,  F.  C.  Waples,  Cedar  Kapids. 

613  Proceedings  of  the  Fourth  Annual  Convention  of  the  Farm  Mortgage 
Bankers  Association  of  America,  1917,  pp.  11,  12,  259;  Proceedings  of  the 
Second  Annual  Convention  of  the  Iowa  Farm  Mortgage  Association,  1915,  pp. 
58-70. 

61*  Prospectus  of  the  Guarantee  Mortgage  and  Finance  Company,  Des  Moines. 

615  Interview  with  F.  C.  Waples,  Cedar  Eapids,  July  27,  1919. 

616  Wight 's  Beport  on  Life  Insurance  Farm  Loan  Investments  in  War  Time, 
August  26,  1918,  p.  11. 

617  Interview  with  F.  C.  Waples,  Cedar  Rapids,  July  27,  1919. 

618  Proceedings  of  the  Sixth  Annual  Convcniion  of  the  Iowa  Farm  Mortgage 
Association,  1919,  manuscript  in  the  possession  of  the  Secretary,  F.  C.  Waples, 
Cedar  Rapids. 

619  Proceedings  of  the  Second  Annual  Convention  of  the  Iowa  Farm  Mortgage 
Association,  1915,  p.  65;  interview  with  F.  C.  Waples,  Cedar  Rapids,  July  27, 
1919. 

620  Census  of  Iowa,  1915,  p.  cv. 

621  Wight 's  Report  on  Life  Insurance  Farm  Loan  Investments  in  War  Time, 
August  26,  1918,  p.  11.  ' '  The  interest  rates  given  are  the  averages  of  rates 
reported  by  companies  on  about  75  per  cent  of  loans  outstanding  in  1914,  and 
1916,  and  on  over  50  per  cent  of  new  loans  made  in  1917. ' ' 

S22  Proceedings  of  the  Sixth  Annual  Convention  of  the  Iowa  Farm  Mort- 
gage Association,  1919,  manuscript  in  the  possession  of  the  Secretary,  F.  C. 
Waples,  Cedar  Rapids. 

623  Proceedings  of  the  Sixth  Annual  Convention  of  the  Iowa  Farm  Mort- 
gage Association,  1919,  manuscript  in  the  possession  of  the  Secretary,  F.  C. 
Waples,  Cedar,  Rapids. 

624  Proceedings  of  the  Annual  Conventions  of  the  Iowa  Farm  Mortgage  As- 
sociation, 1915,  p.  65,  1919,  manuscript  in  the  possession  of  the  Secretary,  F. 
C.  Waples,  Cedar  Rapids. 

625  The  Northwestern  Banker,  March,  1915,  p.  7,  April,  1915,  pp.  20,  21, 
May,  1915,  p.  20;  Journal  of  the  House  of  Bepresentatives,  1915,  p.  1004; 
Journal  of  the  Senate,  1915,  pp.  1344,  1345;  interview  with  F.  C.  Waples, 
Cedar  Rapids,  July  27,  1919. 

27 


418  HISTORY    OF   BANKING   IN   IOWA 

620  The  Federal  Farm  Loan  Act,  sees.  3,  4;  The  Northwestern  Banker,  Oc- 
tober, 1917,  p.  8. 

627  The  Federal  Farm  Loan  Act,  sees.  7,  15,  16. 

628  Eeport  of  the  Secretary  of  the  Treasury,  1918,  pp.  102-104. 

629  Condensed  statement  of  condition  of  the  Federal  Land  Bank  of  Omaha 
at  the  close  of  business,  June  30,  1919. 

«30  The  Federal  Farm  Loan  Act,  sec.  5. 

631  statistical  Abstract  of  the  United  States,  1918,  p.  631;  Annual  Beport  of 
the  Secretary  of  the  Treasury,  1918,  p.  104;  condensed  statement  of  condition 
of  the  Federal  Land  Bank  of  Omaha  at  the  close  of  business,  June  30,  1919. 

632  This  amendment  appears  to  have  been  supported  by  the  Federal  Farm 
Loan  Board  and  the  Joint  Stock  Land  Banks.  No  good  reason  has  been 
brought  forward  for  making  this  subsidy  permanent.  Like  the  Federal  re- 
serve system  the  Federal  farm  loan  system  should  be  made  self-supporting. — 
Third  Annual  Eeport  of  the  Federal  Farm  Loan  Board,  1919,  p.  IS;  Exemp- 
tion of  Joint  StocTc  Land  BanTc  Bonds  from  Taxation  (Hearings  before  the 
Committee  on  Banking  and  Currency  United  States  Senate,  January  10,  12, 
and  13,  1920),  p.  19;  manuscript  letter  from  James  B.  Morman,  Assistant 
Secretary,  Farm  Loan  Board,  dated  July  19,  1920. 

633  The  Federal  Farm  Loan  Act,  sees.  7-10. 

634  The  Federal  Farm  Loan  Act,  sec.  12 ;  manuscript  letter  from  T.  C. 
Hornby,  Chief  Appraiser,  Federal  Land  Bank  of  Omaha,  January  10,  1919; 
The  Northwestern  BanJcer,  June,  1919,  p.  6. 

635  Circular  of  the  Iowa  Joint  Stock  Land  Bank  of  Sioux  City;  manuscript 
letter  of  D.  P.  Hogan,  President  of  the  Federal  Land  Bank  of  Omaha,  dated 
September  4,  1919;  Federal  Farm  Loan  Act,  sec.  12. 

636  Annual  Eeport  of  the  Secretary  of  the  Treasury,  1918,  pp.  102-104 ;  Fed- 
eral Farm  Loan  Act,  sees.  12,  13;  manuscript  letter  from  H.  J.  Crouse,  Ex- 
aminer of  the  Iowa  Joint  Stock  Land  Bank  of  Sioux  City,  dated  January 
20,  1919. 

637  Federal  Farm  Loan  Act,  sees.  18,  19,  20,  26. 

638  Annual  Eeport  of  the  Secretary  of  the  Treasury,  1918,  pp.  104,  345. 

639  The  Northwestern  Banker,  October,  1917,  pp.  21,  72. 

^if^  The  Northwestern  Banker,  October,  1917,  pp.  8,  72;  manuscript  letter 
from  D.  P.  Hogan,  President  of  the  Federal  Land  Bank  of  Omaha,  dated 
September  4,  1919. 

«4i  Putnam's  The  Federal  Farm  Loan  System  in  The  American  Economic 
Beview,  March,  1919,  Vol.  IX,  No.  1,  p.  64. 

««  Third  Annual  Eeport  of  the  Federal  Farm  Loan  Board,  1919,  p.  20. 


NOTES  AND  REFERENCES  419 

643  Federal  Farm  Loan  Act,  sec.  16. 

644  Federal  Farm  Loan  Act,  sees.  16,  18,  28. 

«45  Third  Annual  Eeport  of  the  Federal  Farm  Loan  Board,  1919,  p.  29. 

646  Proceedings  of  the  Fifth  Annual  Convention  of  the  Iowa  Farm  Mort- 
gage Association,  1918,  p.  25. 

64T  Manuscript  letter  from  T.  C.  Hornby,  Chief  Appraiser,  Federal  Land 
Bank  of  Omaha,  dated  January  10,  1919. 

645  Manuscript  letter  from  D.  P.  Hogan,  President  of  the  Federal  Land  Bank 
of  Omaha,  dated  September  4,  1919. 

649  Statement  of  the  Federal  Farm  Loan  Board  showing  condition  of  banks 
to  May  31,  1920. 

650  Proceedings  of  the  Fifth  Annual  Convention  of  the  Iowa  Farm  Mort- 
gage Association,  1918,  pp.  27-30. 

651  The  Midland  Mortgage  Company  of  Cedar  Eapids  made  sales  of  $1,500,- 
000  in  1918  and  was  capitalized  for  $60,000.  The  capital  was  increased  to 
$100,000  and  in  two  years  this  company  handled  five  and  a  half  million  dol- 
lars worth  of  loans. — Manuscript  letter  from  F.  C.  Waples,  Cedar  Rapids,  dated 
June  10,  1920. 

652  Manuscript  letter  from  D.  H.  MeKee,  Des  Moines,  dated  August  15,  1919. 

653  The  Northwestern  BanJcer,  January,  1914,  pp.  7-9,  16,  17,  33. 

654  Proceedings  of  the  Fourth  Annual  Convention  of  the  Farm  Mortgage 
BanJcers  Association  of  America,  1917,  p.  63. 

655  Proceedings  of  the  Fifth  Annual  Convention  of  the  Iowa  Farm  Mort- 
gage Association,  1918,  pp.  45-51. 

656  Proceedings  of  the  Fifth  Annual  Convention  of  the  Iowa  Farm  Mort- 
gage Association,  1918,  pp.  53-57. 

657  Proceedings  of  the  Sixth  Annual  Convention  of  the  Iowa  Farm  Mort- 
gage Association,  1919,  manuscript  in  the  possession  of  the  Secretary,  F.  C. 
Waples,  Cedar  Eapids;  Proceedings  of  the  Seventh  Annual  Convention  of  the 
Iowa  Farm  Mortgage  Association,  1920,  pp.  53-57. 

658  The  Northwestern  BanHcer,  June,  1919,  pp.  4,  6,  7. 

659  Third  Annual  Beport  of  the  Federal  Farm  Loan  Board,  1919,  p.  19 ;  The 
Commercial  and  Financial  Chronicle,  Vol.  109,  p.  1937  (November  22,  1919), 
Vol.  110,  p.  612  (February  14,  1920),  p.  1931  (May  8,  1920);  Proceedings 
of  the  Fourth  Annual  Convention  of  the  Farm  Mortgage  Bankers  Association 
of  America,  1917,  pp.  7,  88-105,  147-158;  Proceedings  of  the  Seventh  Annual 
Meeting  of  the  Iowa  Farm  Mortgage  Association,  1920,  p.  55;  Federal  Trade 
Information  Service,  Vol.  XV,  No.  29,  p.  225  (May  4,  1920),  No,  34,  pp.  266, 
267   (May  10,  1920)  ;   for  a  full  discussion  of  the  history  and  issues  in  this 


420  HISTORY    OF    BANKING    IN    IOWA 

case  see  Preston's  The  Federal  Farm  Loan  Case  in  The  Journal  of  Political 
Economy,  Vol.  XXIX  (June,  1921),  pp.  433-454. 

^^^  Cleveland  Plain  Dealer,  May  19,  1920;  Congressional  Record  (Joint  Reso- 
lution 351,  May  18,  1920),  66th  Congress,  2nd  Session,  p.  7815;  interview  with 
J.  M.  Hungate,  Secretary  of  the  First  Joint  Stock  Land  Bank  of  Chicago, 
June,  1920;  Third  Annual  Report  of  the  Federal  Farm  Loan  Board,  pp.  28, 
29;  Consolidated  Statement  of  Condition  of  the  Joint  Stock  Land  Banks  at 
the  Close  of  Business  May  31,  19S0 ;  Consolidated  Statement  of  Condition  of 
the  Twelve  Federal  Land  Banks  at  the  Close  of  Business  May  31,  1920;  Report 
of  the  Federal  Farm  Loan  Board,  1920,  pp.  3,  4. 

661  Taxation  and  Revenue  Systems  of  State  and  Local  Governments  (Bureau 
of  the  Census,  1914),  p.  79. 

662  Statement  of  the  Federal  Farm  Loan  Board  showing  condition  of  banks 
to  May  31,  1920. 

663  Wight 's  Report  on  Life  Insurance  Farm  Loan  Investments  in  War  Time, 
August  26,  1918,  p.  11.  The  interest  rates  are  the  average  of  rates  reported 
by  companies  on  over  50  per  cent  of  the  loans  made. 

664  United  States  Investor,  Vol.  XXIX,  No.  39,  p.  1398    (September  28, 
1918). 

CHAPTER  XIII 

665  Wassam  'a  Salary  Loan  Business  in  New  York  City,  pp.  28-42. 

666  Manuscript  letter  from  J.  B.  Gilder,  Secretary  of  the  Industrial  Finance 
Corporation,  dated  February  8,  1919. 

667  Manuscript  letter  from  J.  B.  Gilder,  Secretary  of  the  Industrial  Finance 
Corporation,  dated  February  26,  1919. 

668  The  Morris  Plan  of  Industrial  Loans  and  Investments  (published  by  the 
Industrial  Finance  Corporation,  New  York),  pp.  8,  12,  32,  40. 

669  National  Magazine,  Vol.  XLV,  No.  3,  pp.  334-342,  December,  1916. 

670  Manuscript  letters  from  J.  B.  Gilder,  Secretary  of  the  Industrial  Finance 
Corporation,  dated  February  8,  26,  1919. 

671  Interview  with  Harry  E.  Pratt,  Cedar  Rapids,  August,  1918. 

6T2  Sow  to  Borrow  Money  from  the  Waterloo  Morris  Plan  Company;  Annual 
Report  of  the  Morris  Plan  Company  of  Cedar  Rapids,  1918. 

673  Statements  of  condition  published  by  the  Waterloo  company,  January 
1,  1918,  covering  the  period  from  April,  1916,  to  January  1,  1918,  and  by  the 
Cedar  Rapids  Company,  for  the  period  from  November,  1916,  down  to  Janu- 
ary, 1919. 

674  Annual  Report  of  the  Morris  Plan  Company  of  Cedar  Rapids,  1918. 


NOTES  AND  REFERENCES  421 

675  The  Morris  Plan  of  Industrial  Loans  and  Investments  (published  by  the 
Industrial  Finance  Corporation,  New  York),  pp.  46-48;  Annual  Report  of  the 
Morris  Plan  Company  of  Cedar  Rapids,  1918. 

676  Manuscript  letter  from  J.  E.  Kirbye,  President  of  the  Morris  Plan  Com- 
pany of  Des  Moines,  dated  March  5,  1919;  Annual  Report  of  the  Morris  Plan 
Company  of  Cedar  Rapids,  1918. 

677  Laws  of  Iowa,  1919,  ch.  151 ;  manuscript  letter  from  Frank  S.  Shaw, 
Auditor  of  State,  dated  August  5,  1919. 

678  Manuscript  letter  from  L.  B.  Milligan,  Secretary-Manager  of  the  Daven- 
port Morris  Plan  Company,  dated  February  22,  1919. 

679  Laws  of  Iowa,  1921,  chs.  119,  131,  157,  161. 

680  Prospectus  of  the  Iowa  Farm  Credit  Corporation. 

681  Letters  from  Vincent  Starzinger,  Des  Moines,  dated  August  12  and  16, 
1919;  interview  with  Harry  E.  Pratt,  Secretary-Manager  of  the  Cedar  Eapida 
Morris  Plan  Company;  circulars  of  the  Iowa  Guarantee  Mortgage  Corporation 
of  Des  Moines. 

«»2  Statistical  Abstract  of  the  United  States,  1918,  p.  156. 

683  YearhooTc  of  the  United  States  Department  of  Agriculture,  1916,  pp.  672, 
692. 

684  Larmer  's  The  Cattle  Loan  Company  in  The  Journal  of  Political  Economy, 
Vol.  XXVI,  p.  822  (October,  1918). 

685  When  cattle  are  condemned  because  of  contagious  disease  the  loss  is 
largely  borne  by  the  government. 

686  Larmer 's  The  Cattle  Loan  Company  in  The  Journal  of  Political  Eco- 
nomy, Vol.  XXVI,  p.  823   (October,  1918). 

687  Letter  from  A.  G.  Sam,  Vice  President  of  the  Live  Stock  National  Bank 
of  Sioux  City,  dated  August  20,  1919. 

688  Companies  listed  in  Iowa  were : 

Sioux  City  Cattle  Loan  Company Sioux  City 

Sioux  City  Bond  and  Mortgage  Company Sioux  City 

United  Cattle  Loan  and  Live  Stock  Company Des  Moines 

Federal  Cattle  Loan  Society Des  Moines 

Union  Cattle  Loan  and  Mortgage  Company Des  Moines 

Manuscript  letter  from  L.  E.  Stevens,  Vice  President  of  the  United  Cattle 
Loan  and  Live  Stock  Company,  dated  August  6,  1919. 

689  Manuscript  letter  from  A.  G.  Sam,  Vice  President  of  the  Live  Stock  Na- 
tional Bank  of  Sioux  City,  dated  August  20,  1919;  manuscript  letter  from  D. 
H.  Hedrick,  President  of  the  Battle  Creek  Savings  Bank,  dated  August  18, 
1919. 


422  HISTORY   OF    BANKING   IN   IOWA 

690  Proceedings  of  the  Twelfth  Annual  Convention  of  the  Iowa  Bankers  As- 
sociation, 1898,  pp.  43-45. 

691  Census  of  Iowa,  1915,  p.  191. 

692  Manuscript  of  address  delivered  by  D.  H.  Hedrick  at  the  annual  meeting 
of  Group  One,  Iowa  Bankers  Association,  May,  1918;  manuscript  letter  from 
D.  H.  Hedrick,  President  of  the  Battle  Creek  Savings  Bank,  dated  August  18, 
1919. 

693  Biennial  Seport  of  the  Superintendent  of  BanMng,  1918,  p.  42. 

694  Manuscript  letter  from  D.  H.  Hedrick,  President  of  the  Battle  Creek 
Savings  Bank,  dated  August  18,  1919. 

695  Manuscript  letter  from  A.  G.  Sam,  Vice  President  of  the  Live  Stock 
National  Bank,  Sioux  City,  dated  August  20,  1919. 

696  Manuscript  letter  from  I.  E.  Dierdorff,  Vice  President  of  Geo.  M.  Bech- 
tel  and  Co.,  Bankers,  Davenport,  dated  August  27,  1919. 

697  Wealth,  Beht  and  Taxation,  Special  Report  of  the  Bureau  of  the  Census, 
1913,  Vol.  I,  Pt.  II,  p.  17,  Pt.  Ill,  pp.  37,  38,  93. 

698  Manuscript  letter  from  I.  E.  Dierdorff,  Vice  President  of  Geo.  M.  Bech- 
tel  and  Co.,  Bankers,  Davenport,  dated  July  25,  1919. 

699  Manuscript  letter  from  A.  M.  Schanke,  President  of  Schanke  and  Com- 
pany, Investment  Bankers,  Mason  City,  dated  August  8,  1919. 

700  Partial  list  of  Investment  Bankers  in  Iowa  in  1919  gathered  from  cor- 
respondence and  advertisements. 

1.  Bankers  Mortgage  Company Des  Moines 

2.  Bechtel  and  Company Davenport 

3.  White-Phillips  Company Davenport 

4.  Schanke  and  Company Mason  City 

5.  H.  C.  Adams  and  Co.  Investment  Bankers Algona 

6.  Iowa  Investment  Corporation Waterloo 

7.  Guarantee  Mortgage  and  Finance  Co Des  Moines 

8.  Canfield  Bros.  Investment  Bankers Cedar  Eapids 

9.  C.  J.  Weiser  Investment  Banker Decorah 

Toi  Laws  of  Iowa,  1919,  ch.  236. 

702  Manuscript  letter  from  Frank  Warner,  Secretary  of  the  Iowa  Bankers 
Association,  dated  July  25,  1919. 

703  Information  regarding  the  nature  of  their  business  was  obtained  through 
letters  from  the  following  companies: 

Geo.  M.  Bechtel  and  Company Davenport 

Schanke  and  Company Mason  City 

Guarantee  Mortgage  and  Finance  Company Des  Moines 

Bankers  Mortgage  Company Des  Moines 


NOTES  AND  REFERENCES  423 

704  Manuscript  letter  from  I.  E.  Dierdorff,  Vice  President  of  Geo.  M.  Bech- 
tel  and  Company,  Davenport,  dated  August  27,  1919. 

705  Manuscript  letter  from  Frank  Warner,  Secretary  of  the  Iowa  Bankers 
Association,  dated  July  25,  1919. 

706  Manuscript  letter  from  I.  E.  Dierdorff,  Vice  President  of  Geo.  M.  Bech- 
tel  and  Company,  Davenport,  dated  August  27,  1919;  manuscript  letter  from 
A.  M.  Sehanke,  President  of  Schanke  and  Company,  Mason  City,  dated  August 
8,  1919;  manuscript  letter  from  Geo.  A.  Chaney,  Vice  President  of  the  Bank- 
ers Mortgage  Company,  Des  Moines,  dated  August  6,  1919;  manuscript  letter 
from  E.  B.  Parrott,  President  of  the  Guarantee  Mortgage  and  Finance  Com- 
pany, Des  Moines,  dated  August  6,  1919. 

70T  Laws  of  Iowa,  1919,  ch.  237. 

708  Iowa  State  Highway  Commission  Service  Bulletin,  Vol.  VII,  Nos.  5-6, 
p.  3,  May-June,  1919. 

709  Kemmerer  's  Postal  Savings,  pp.  1-3. 

'^^0  Annual  Report  of  the  Post  Office  Department,  1917,  p.  58;  Kemmerer 'a 
Postal  Savings,  pp.  135,  136,  147. 

7n  Annual  Beport  of  the  Post  Office  Department,  1917,  p.  58. 

T ^2  Annual  Beport  of  the  Secretary  of  the  Treasury  (Finance),  1918,  p.  552. 

713  Annual  Beport  of  the  Post  Office  Department,  1916,  p.  28,  1917,  p.  58. 

''^i  Statistical  Abstract  of  the  United  States,  1918,  p.  643;  Beport  of  the 
Comptroller  of  the  Currency,  1919,  Vol.  I,  p.  196. 

715  Kemmerer 's  Postal  Savings,  pp.  68,  69. 

Deposits  in  Iowa  postal  banks  reached  a  total  of  $620,362  in  1918  but  dropped 
again  in  1919  to  $523,601. — Beport  of  the  Comptroller  of  the  Currency,  1919, 
Vol.  I,  p.  196. 

716  Kemmerer 's  Postal  Savings,  pp.  72,  73;  Annual  Beport  of  the  Post  Of- 
fice Department,  1917,  p.  58. 

717  Kemmerer 's  Postal  Savings,  pp.  57,  58. 


CHAPTEE  XIV 

718  Dunbar's  Theory  and  History  of  Banking,  pp.  9-15;  Holdsworth's  Money 
and  Banking,  p.  148. 

719  Abstract  of  reports  of  the  condition  of  Iowa  savings  banks,  State  banks, 
and  trust  companies,  December  31,  1919. 

720  Beport  of  the  Comptroller  of  the  Currency,  1919,  Vol.  II,  pp.  253,  318. 

721  The  Battle  Creek  Times,  July  15,  1920. 


424  HISTORY    OF    BANKING    IN    IOWA 

722  Beginning  with  1904  the  question  of  deposit  insurance  in  some  form  was 
a  prominent  issue  before  the  conventions  of  the  Iowa  Bankers  Association  for 
some  time.  At  first  there  was  strong  suj^port  for  the  measure  with  almost 
equal  division  apparently  on  the  issue.  In  1908  the  question  became  a  party 
issue  in  the  national  political  campaign.  The  Republican  victory  of  that  year 
seemed  to  quiet  for  a  time  any  discussion  of  the  problem. 

In  Iowa  the  matter  came  before  the  State  legislature  in  the  session  of  1915 
and  again  in  1921.  The  legislative  committee  of  the  Iowa  Bankers  Associa- 
tion both  times  opposed  the  measure  and  claims  credit  for  having  helped  to 
defeat  it.  During  1918-1919  there  was  pending  in  Congress  a  bill  providing 
for  the  government  guarantee  of  deposits  in  national  banks  to  the  amount  of 
$5000.  This  measure  was  opposed  by  a  resolution  of  the  Iowa  Bankers  As- 
sociation which  further  stated :  ' '  That  we  are  opposed  to  the  principle  of 
Government  Guarantee  of  Deposit  in  any  form  or  amount. ' '  The  opinion, 
therefore,  of  the  bankers,  which  a  decade  earlier  was  not  clearly  either  for  or 
against  the  measure,  has  become  conclusively  lined  up  in  opposition.  The 
persistence  of  this  question  leads  to  the  belief  that  it  still  remains  an  unset- 
tled issue.  Iowa  is  in  a  favorable  position,  however,  to  watch  the  experiment 
in  neighboring  States  before  making  a  final  decision. — Proceedings  of  the 
Eighteenth  Annual  Convention  of  the  Iowa  Bankers  Association,  1904,  p.  54; 
Proceedings  of  the  Nineteenth  Annual  Convention  of  the  Iowa  Banlcers  Asso- 
ciation, 1905,  pp.  58-70 ;  Proceedings  of  the  Twentieth  Annual  Convention  of 
the  Iowa  Banlcers  Association,  1906,  pp.  17,  61;  Proceedings  of  the  Twenty- 
first  Annual  Convention  of  the  Iowa  Bankers  Association,  1907,  pp.  15,  16; 
Proceedings  of  the  Twenty-second  Annual  Convention  of  the  Iowa  Bankers 
Association,  1908,  pp.  56-76,  109;  Proceedings  of  the  Twenty-ninth  Annual 
Convention  of  the  Iowa  Bankers  Association,  1915,  p.  28;  Proceedings  of  the 
Thirty-second  Annual  Convention  of  the  Iowa  Bankers  Association,  1918,  p. 
164;  Holdsworth's  Money  and  Banking,  pp.  198-200;  Iowa  Bankers  Associa- 
tion, Bulletin  No.  967,  p.  16. 

"J^sBeports  of  the  Comptroller  of  the  Currency,  1909,  p.  47,  1915,  Vol.  II, 
p.  977. 

724  Laws  of  Iowa,  1921,  ch.  114. 

Prior  to  1921  the  rate  was  two  per  cent. — Compiled  Code,  1919,  sec.  4767. 

725  Letter  from  Mrs.  Sarah  G.  French,  Legal  Clerk  of  the  Department  of 
Banking,  dated  July  22,  1920. 

726  In  October,  1919,  Iowa  national  banks  had  outstanding  $19,313,000  of 
circulating  notes. — Report  of  the  Comptroller  of  the  Currency,  1919,  Vol.  II, 
p.  318. 

727  Kinley's  The  Use  of  Credit  Instruments  in  Payments  in  the  United  States 
in  Senate  Documents,  61st  Congress,  2nd  Session,  Vol.  IX,  p.  198. 

728  White's  Money  and  Banking  (Fifth  Edition),  p.  193. 


NOTES  AND  REFERENCES  425 

729  Proceedings  of  the  Thirty-second  Annual  Convention  of  the  Iowa  Bankers 
Association,  1918,  pp.  163,  194-196. 

"0  Code  of  1897,  sec.  3038. 

731  On  June  30,  1920,  the  Battle  Creek  Savings  Bank,  a  member  bank  of  the 
Federal  reserve  system,  reported  rediscounts  of  $202,553  on  loans  of  a  little 
over  a  million  dollars. 

732  Monthly  Bulletin  of  the  National  City  Bank  of  New  York,  May,  1920, 
p.  13. 

733  Pamphlet  of  the  Cedar  Bapids  Savings  Bank. 

734  Interview  with  P.  A.  Korab,  Vice  President  of  the  Iowa  City  State 
Bank,  August  12,  1920. 

735  James  W.  Gilbart  in  his  book  The  History,  Principles  and  Practice  of 
Banking,  published  in  1837,  lists  this  as  one  of  the  services  of  banks. — Mar- 
shall's Readings  in  Industrial  Society,  p.  349. 

736  "Whiteside's  The  Economic  Functions  of  a  Country  Bank,  p.  21.  This 
was  privately  published  by  the  First  National  Bank  of  Greencastle,  Indiana. 

737  Reports  to  the  Thirty-fifth  Annual  Convention  of  the  Iowa  Bankers  As- 
sociation, 1921,  p.  37. 

738  Proceedings  of  the  Thirty-fourth  Annual  Convention  of  the  Iowa  Bankers 
Association,  1920,  p.  191. 

739  Proceedings  of  the  Twenty-ninth  Annual  Convention  of  the  Iowa  Bankers 
Association,  1915,  pp.  24,  27;  Proceedings  of  the  Thirtieth  Annual  Convention 
of  the  Iowa  Bankers  Association,  1916,  pp.  39-41,  75-84;  Proceedings  of  the 
Thirty-first  Annual  Convention  of  the  Iowa  Bankers  Association,  1917,  pp.  159- 
167;  Proceedings  of  the  Thirty-second  Annual  Convention  of  the  Iowa  Bank- 
ers Association,  1918,  pp.  186-193. 

740  Farm  Land  Values  in  Iowa  (Bulletin  No.  874  issued  by  the  United  States 
Department  of  Agriculture) . 

741  Proceedings  of  the  Thirty-second  Annual  Convention  of  the  Iowa  Bankers 
Association,  1918,  pp.  188,  189. 

742  Proceedings  of  the  Twenty-ninth  Annual  Convention  of  the  Iowa  Bankers 
Association,  1915,  pp.  122,  123;  Proceedings  of  the  Thirtieth  Annual  Conven- 
tion of  the  Iowa  Bankers  Association,  1916,  p.  42;  Proceedings  of  the  Thirty- 
second  Annual  Convention  of  the  Iowa  Bankers  Association,  1918,  pp.  193,  194; 
Proceedings  of  the  Thirty-third  Annual  Convention  of  the  Iowa  Bankers  Asso- 
ciation, 1919,  pp.  204-208. 

743  Whitney's  The  Sale  of  War  Bonds  in  Iowa,  ch.  Ill  (manuscript). 

744  Proceedings  of  the  Thirty-first  A7inual  Convention  of  the  Iowa  Bankers 
Association,  1917,  p.  164. 

745  Whitney's  The  Sale  of  War  Bonds  in  Iowa,  ch.  IV  (manuscript). 


426  HISTORY   OF   BANKING   IN   IOWA 

746  Whitney's  The  Sale  of  War  Bonds  in  Iowa,  ch.  IV  (manuscript). 

7*7  Proceedings  of  the  Thirtieth  Annual  Convention  of  the  Iowa  Bankers 
Association,  1916,  p.  95;  Proceedings  of  the  Thirty-first  Annual  Convention  of 
the  Iowa  Bankers  Association,  1917,  pp.  69,  137,  138;  Proceedings  of  the 
Thirty-second  Annual  Convention  of  the  Iowa  Bankers  Association,  1918,  pp. 
163-165;  Proceedings  of  the  Thirty-third  Annual  Convention  of  the  Iowa  Bank- 
ers Association,  1919,  p.  231. 

718  The  Northwestern  Banker,  June,  1920,  p.  14. 

749  Proceedings  of  the  Second  Annual  Convention  of  the  Iowa  Bankers  As- 
sociation, 1888,  p.  7. 

750  Proceedings  of  the  Third  Annual  Convention  of  the  Iowa  Bankers  As- 
sociation, 1889,  pp.  7,  68,  69. 

751  Proceedings  of  the  Fourth  Annual  Convention  of  the  Iowa  Bankers  As- 
sociation, 1890,  p.  19;  Proceedings  of  the  Sixth  Annual  Convention  of  the 
Iowa  Bankers  Association,  1892,  p.  17;  Proceedings  of  the  Eleventh  Annual 
Convention  of  the  Iowa  Bankers  Association,  1897,  pp.  10-13. 

''^^  Abstract  of  the  Thirteenth  Census  of  the  United  States,  1910,  p.  24; 
Fourteenth  Census  of  the  United  States,  1920,  Bulletin  on  Population  in  Iowa, 
p.  1. 

753  Wealth,  Debt,  and  Taxation,  Special  Beport  of  the  Bureau  of  the  Census, 
1913,  Vol.  I,  Pt.  I,  p.  26. 

764  Census  of  Iowa,  1915,  p.  xxvii. 

755  Census  of  Iowa,  1915,  p.  212;  Biennial  Beport  of  the  Superintendent  of 
Banking,  1918,  p.  239. 

766  Census  of  Iowa,  1915,  p.  578;  The  Battle  Creek  Times,  July  15,  1920. 

767  Interview  with  P.  A.  Korab,  Vice  President  of  the  Iowa  City  State  Bank, 
August  12,  1920. 

758  Interview  with  C.  D.  Kirkpatrick,  Keota,  Iowa,  July,  1920. 

759  Proceedings  of  the  Thirtieth  Annual  Convention  of  the  Iowa  Bankers 
Association,  1916,  p.  84. 

7«o  Letter  from  D.  H.  Hedrick,  President  of  the  Battle  Creek  Savings  Bank, 
dated  July  7,  1919. 

761  Beport  of  the  Comptroller  of  the  Currency,  1900,  Vol.  I,  p.  422,  1901, 
Vol.  I,  pp.  447,  451,  1902,  Vol.  I,  pp.  239,  243,  1907,  pp.  236,  237,  1911,  p.  320, 
1912,  pp.  274,  275,  1913,  pp.  302,  303,  1914,  Vol.  II,  pp.  214,  215,  1915,  Vol.  II, 
pp.  278,  279,  1916,  Vol.  II,  pp.  322,  323,  1917,  Vol.  II,  pp.  292,  293,  1918,  Vol. 
II,  p.  239,  1919,  Vol.  II,  p.  257. 

782  Beport  of  the  Comptroller  of  the  Currency,  1919,  Vol.  II,  p.  257. 


NOTES  AND  REFERENCES  427 

'^^^  Report  of  the  Comptroller  of  the  Currency,  1914,  Vol.  II,  pp.  752-755, 
1915,  Vol.  II,  p.  975. 

764  National  banks  had  aggregate  capital  of  $25,115,000  and  total  assets  of 
$422,381,000.  The  corresponding  figures  for  State  incorporated  banks  were 
$49,546,000  and  $696,565,000  respectively. 

105  Index-Digest  of  the  Federal  Reserve  Act  and  Amendments  (Second  Edi- 
tion), pp.  27,  28;  Report  of  the  Comptroller  of  the  Currency,  1919,  Vol.  II, 
p.  253. 

766  Interview  with  W.  J.  McChesney,  President  of  the  First  National  Bank 
of  Iowa  City,  August  14,  1920. 

767  The  Battle  Creek  Times,  July  15,  1920. 

768  Whitney 's  The  Overdraft  Evil  as  Illustrated  iy  Conditions  in  Iowa  Banks 
in  The  American  Economic  Review,  Vol.  VIII,  pp.  48-61. 


CHAPTER   XV 

769  Proceedings  of  the  First  Annual  Convention  of  the  Iowa  Bankers  Asso- 
ciation, 1887,  p.  5. 

770  Proceedings  of  the  First  Annual  Convention  of  the  Iowa  Bankers  As- 
sociation, 1887,  pp.  8-15. 

771  Proceedings  of  the  Thirty-second  Annual  Convention  of  the  Iowa  Bankers 
Association,  1918,  p.  166. 

772  The  Fort  Dodge  Messenger,  June  25,  1919 ;  Proceedings  of  the  Thirty- 
third  Annual  Convention  of  the  Iowa  Bankers  Association,  1919,  pp.  156,  157. 

773  Proceedings  of  the  Second  Annual  Convention  of  the  Iowa  Bankers  As- 
sociation, 1888,  p.  10. 

774  Proceedings  of  the  Twenty-fifth  Annual  Convention  of  the  Iowa  Bankers 
Association,  1911,  pp.  94-103. 

775  Proceedings  of  the  Seventh  Annual  Convention  of  the  Iowa  Bankers  As- 
sociation, 1893,  p.  6. 

776  Proceedings  of  the  Thirty-second  Annual  Convention  of  the  Iowa  Bankers 
Association,  1918,  p.  72. 

Whatever  may  have  been  Mr.  Deming's  basis  for  explanation  of  the  presi- 
dent's absence  the  records  show  that  his  memory  betrayed  him  into  a  rosy 
optimism  regarding  the  size  of  the  gathering.  Instead  of  150  bankers,  70 
were  registered  for  that  meeting. — Proceedings  of  the  Twenty-fifth  Annual 
Convention  of  the  Iowa  Bankers  Association,  1911,  pp.  94-103. 

777  Proceedings  of  the  Sixth  Annual  Convention  of  the  Iowa  Bankers  As- 
sociation, 1892,  p.  14. 


428  HISTORY    OF    BANKING    IN    IOWA 

TT^ Proceedings  of  the  Eleventh  Annual  Convention  of  the  Iowa  Bankers 
Association,  1897,  p.  18. 

T79  Proceedings  of  the  Twenty-fifth  Annual  Convention  of  the  Iowa  Bankers 
Association,  1911,  p.  97. 

780  Proceedings  of  the  Fourth  Annual  Convention  of  the  Iowa  Bankers  As- 
sociation, 1890,  pp.  59,  60. 

'J ^^  Proceedings  of  the  Eleventh  Annual  Convention  of  the  Iowa  Bankers 
Association,  1897,  p.  95;  Proceedings  of  the  Fourteenth  Annual  Convention 
of  the  Iowa  Bankers  Association,  1900,  p.  73;  Proceedings  of  the  Twenty- 
fourth  Annual  Convention  of  the  Iowa  Bankers  Association,  1910,  p.  37;  inter- 
view with  J.  M.  Dinwiddle,  Cedar  Kapids,  1918. 

Tf^-  Proceedings  of  the  Twenty-second  Annual  Convention  of  the  Iowa  Bank- 
ers Association,  1908,  p.  21. 

783  Proceedings  of  the  Twenty-fourth  Annual  Convention  of  the  Iowa  Bank- 
ers Association,  1910,  pp.  80,  81. 

784  Proceedings  of  the  Second  Annual  Convention  of  the  Iowa  Bankers  As- 
sociation, 1888,  pp.  19-24. 

785  Proceedings  of  the  Twenty-fifth  Annual  Convention  of  the  Iowa  Bankers 
Association,  1911,  pp.  94-103;  letter  from  Frank  Warner,  July  27,  1921. 

786  Proceedings  of  the  Twentieth  Annual  Convention  of  the  Iowa  Banker* 
Association,  1906,  p.  19. 

T87  Proceedings  of  the  Twenty -seventh  Annual  Convention  of  the  Iowa  Bank- 
ers Association,  1913,  p.  113. 

7 sa  Proceedings  of  the  Thirty-third  Annual  Convention  of  the  Iowa  Bankers 
Association,  1919,  p.  330. 

789  Proceedings  of  the  Thirty-first  Annual  Convention  of  the  Iowa  Bankers 
Association,  1917,  p.  177. 

790  Proceedings  of  the  Sixth  Annual  Convention  of  the  Iowa  Bankers  As- 
sociation, 1892,  pp.  47,  74-77. 

791  Proceedings  of  the  Fourteenth  Annual  Convention  of  the  Iowa  Bankers 
Association,  1900,  p.  56. 

''^^Proceedings  of  the  Sixteenth  Annual  Convention  of  the  Iowa  Bankers 
Association,  1902,  pp.  48,  85. 

793  Proceedings  of  the  Twenty-sixth  Annual  Convention  of  the  Iowa  Bankers 
Association,  1912,  p.  154;  Proceedings  of  the  Thirty-fourth  Annual  Convention 
of  the  Iowa  Bankers  Association,  1920,  p.  14. 

79*  Proceedings  of  the  Seventeenth  Annual  Convention  of  the  Iowa  Bankers 
Association,  1903,  p.  12. 

795  Proceedings  of  the  Fifth  Annual  Convention  of  the  Iowa  Farm  Mortgage 


NOTES  AND  REFERENCES  429 

Association,  1918,  p.  84;  Proceedings  of  the  Thirty-first  Annual  Convention  of 
the  Iowa  Bankers  Association,  1917,  p.  53. 

798  Proceedings  of  the  Thirty-second  Annual  Convention  of  the  Iowa  Bank- 
ers Association,  1918,  pp.  67,  68. 

i9~i  Proceedings  of  the  Second  Annual  Convention  of  the  Iowa  Bankers  As- 
sociation, 1888,  p.  13;  Proceedings  of  the  Thirty-third  An7iual  Convention  of 
the  Iowa  Bankers  Association,  1919,  pp.  5-17,  28,  89-95. 

798  Proceedings  of  the  Twenty-fourth  Annual  Convention  of  the  loiva  Bank- 
ers Association,  1910,  pp.  36-39,  85. 

799  Proceedings  of  the  Thirty-first  Annual  Convention  of  the  Iowa  Bankers 
Association,  1917,  pp.  62,  153. 

800  Proceedings  of  the  Eleventh  Annual  Convention  of  the  Iowa  Bankers 
Association,  1897,  pp.  19-24,  50. 

801  Proceedings  of  the  Eleventh  Annual  Convention  of  the  Iowa  Bankers 
Association,  1897,  p.  5;  Proceedings  of  the  Fourteenth  Annual  Convention  of 
the  Iowa  Bankers  Association,  1900,  p.  17;  Proceedings  of  the  SeventeentU 
Annual  Convention  of  the  Iowa  Bankers  Association,  1903,  p.  8;  Proceedings 
of  the  Nineteenth  Annual  Convention  of  the  Iowa  Bankers  Association,  1905, 
pp.  54-57;  Proceedings  of  the  Thirty-third  Annual  Convention  of  the  Iowa 
Bankers  Association,  1919,  p.  12, 

802  Proceedings  of  the  Thirty-third  Annual  Convention  of  the  Iowa  Bankers 
Association,  1919,  pp.  5-17. 

803  Proceedings  of  the  Thirty-first  Annual  Convention  of  the  Iowa  Bankers 
Association,  1917,  pp.  151,  152. 

804  Proceedings  of  the  Thirty-second  Annual  Convention  of  the  Iowa  Bankers 
Association,  1918,  pp.  163,  178;  Proceedings  of  the  Thirty-third  Annual  Con- 
vention of  the  Iowa  Bankers  Association,  1919,  p.  185;  letter  from  Frank 
Warner,  July  27,  1921. 

805  Proceedings  of  the  Eleventh  Arinual  Convention  of  the  Iowa  Bankers  As- 
sociation, 1897,  pp.  25,  94-97. 

806  Proceedings  of  the  Thirty-second  Annual  Convention  of  the  Iowa  Bankers 
Association,  1918,  pp.  114,  117,  118,  144;  manuscript  letter  from  Frank  Warner, 
Secretary  of  the  Iowa  Bankers  Association,  dated  Des  Moines,  March  30,  1920. 

807  Proceedings  of  the  Twelfth  Annual  Convention  of  the  Iowa  Bankers  As- 
sociation, 1898,  p.  72 ;  Proceedings  of  the  Sixteenth  Annual  Convention  of  the 
Iowa  Bankers  Association,  1902,  p.  35;  Proceedings  of  the  Twentieth  Annual 
Convention  of  the  Iowa  Bankers  Association,  1906,  p.  24;  Proceedings  of  the 
Twenty-fifth  Annual  Convention  of  the  Iowa  Bankers  Association,  1911,  p.  58; 
Proceedings  of  the  Thirty-first  Annual  Convention  of  the  Iowa  Bankers  As- 
sociation, 1917,  pp.  138,  139,  171;  Proceedings  of  the  Thirty-second  Annual 
Convention  of  the  Iowa  Bankers  Association,  1918,  pp.  196-202;  Proceedings 


430  HISTORY    OF    BANKING    IN    IOWA 

of  the  Thirty-third  Annual  Convention  of  the  Iowa  BanTcers  Association,  1919, 
pp.  11,  176,  177;  Eeports  to  the  Thirty-fifth  Annual  Convention  of  the  Iowa 
'  Banlcers  Association,  1921,  pp.  6-12,  54-66;  manuscript  letter  from  Frank  War- 
ner, dated  July  27,  1921;  The  Northivestern  Banker,  May,  1921,  pp.  15,  110, 
112;  Laws  of  Iowa,  1921,  ch.  186;  Iowa  Bankers  Association  Bulletin,  No.  967. 

808  Proceedings  of  the  Eighteenth  A7inual  Convention  of  the  Iowa  Bankers 
Association,  1904,  pp.  65-67;  Proceedings  of  the  Twentieth  Annual  Convention 
of  the  Iowa  Bankers  Association,  1906,  pp.  21-23;  Proceedings  of  the  Twenty- 
sixth  Annual  Convention  of  the  Iowa  Bankers  Association,  1912,  pp.  21,  22; 
Proceedings  of  the  Thirty-second  Annual  Convention  of  the  Iowa  Bankers  As- 
sociation, 1918,  p.  194. 

809  Proceedings  of  the  Twentieth  Annual  Convention  of  the  Iowa  Bankers 
Association,  1906,  pp.  24-32;  Proceedings  of  the  Twenty-first  Annual  Conven- 
tion of  the  Iowa  Bankers  Association,  1907,  pp.  15,  27,  28;  Proceedings  of  the 
Twenty-fourth  Annual  Convention  of  the  Iowa  Bankers  Association,  1910,  pp. 
25,  28;  Proceedings  of  the  Thirty-first  Annual  Convention  of  the  Iowa  Bankers 
Association,  1917,  p.  142;  Proceedings  of  the  Thirty-second  Annual  Convention 
of  the  Iowa  Bankers  Association,  1918,  p.  177;  Annual  Eeports  to  the  Thirty- 
fifth  Annual  Convention  of  the  Iowa  Bankers  Association,  1921,  p.  13. 

810  Proceedings  of  the  Thirty-first  Annual  Convention  of  the  Iowa  Bankers 
Association,  1917,  pp.  144,  154-159 ;  Proceedings  of  the  Thirty-second  Annual 
Convention  of  the  Iowa  Bankers  Association,  1918,  pp.  185,  186;  Legislative 
Committee  Bulletin  Iowa  Bankers  Association,  No.  439,  Vol.  XIV,  April  26, 
1919. 

811  Proceedings  of  the  Thirty-second  Annual  Convention  of  the  Iowa  Bank- 
ers Association,  1918,  pp.  180,  181. 

«n  Proceedings  of  the  Twenty-sixth  Annual  Convention  of  the  Iowa  Bankers 
Association,  1912,  pp.  94-99;  Proceedings  of  the  Twenty-eighth  Annual  Con- 
vention of  the  Iowa  Bankers  Association,  1914,  p.  71;  Proceedings  of  the 
Thirty-first  Annual  Convention  of  the  Iowa  Bankers  Association,  1917,  p.  152; 
Proceedings  of  the  Thirty-second  Annual  Convention  of  the  Iowa  Bankers  As- 
sociation, 1918,  pp.  163,  194-196. 


INDEX 


431 


INDEX 


Abbott,  Mr.,  application  of,  for  bank  char- 
ter,   100 

Accessibility   of   banks,    353,    354 

Accountant,  employment  of,  in  Banking  De- 
partment, 199 

Accounting,    promotion    of,    by    banks,    345 

Adams,  H.  C,  and  Co.,  Investment  Bank- 
ers   (Algona),    mention    of,    422 

Adding  machine,  provision  for,   359 

Agricultural  Bank  of  Tennessee,  notes  of, 
64,    65 

Agricultural  products,   prices  of,   4,    5 

Agriculture,  early  difficulties  in,  3,  4; 
growth  of,  in  Iowa,  45,  46 ;  assistance 
of   banks   to,    346-348 

Aldrich-Vreeland  Act,  passage  of,  205;  pro- 
visions of,   205,   237;  expiration  of,  227 

Alfalfa,  prize  for,   347 

Algona,  investment  bankers  at,  422 

Allen,  Benjamin  F.,  early  bank  of,  52; 
banking  interests  of,  62 ;  notes  circulated 
by,  63,  64 ;  application  of,  for  bank  char- 
ter,  100 

American  Bankers  Association,  sending  of 
J.  M.  Dinwiddie  to  meeting  of,  365 ;  re- 
lations of,  with  Iowa  Bankers  Associa- 
tion, 373,  374;  Iowa  members  of,  374; 
legislative  work  of,   380,    381 

American  Building  Association  News,  dis- 
tribution of,   264 

American  Commercial  and  Savings  Bank 
(Davenport),  size  of,  160;  membership 
of,  in  Federal  reserve  system,  211 

American  Trade  Acceptance  Council,  meet- 
ing of,  339 

Anderson,   George  C,   early  bank  of,   51 

Andrew,  L.  A.,  participation  of,  in  confer- 
ence, 216,  217;  position  of,  as  president 
of  Iowa  Farm  Credit  Corporation,  316; 
office  of,  in  Iowa  Bankers  Association, 
370 

Arkansas,   experiment  of,  with  State  bank, 

83 ;  banks  prohibited  by,  390 
Assets,  statistics  of,  for  Iowa  national 
banks,  149,  150;  total  amount  of,  for 
Iowa  banks,  173,  427;  growth  of,  180, 
181;  reports  concerning,  185;  fees  based 
on,  195 
Attorney  General,  notice  of  insolvency  sent 
to,  137;  criminal  bureau  in  office  of, 
376 

28 


Auditor  of  State,  note  issue  supervised  by, 
77,  78;  money  kept  in  State  Bank  by, 
109;  bank  report  of,  133,  136,  137,  141, 
142,  143;  report  of  banks  to,  135; 
authority  of,  over  State  banks,  137,  138, 
150,  184,  185,  186,  187,  188,  189,  196 
197;  supervision  of,  over  savings  banks, 
138,  139,  141,  158;  control  of,  over  loan 
and  trust  companies,  160,  161;  recom- 
mendation of,  concerning  private  banks, 
163,  165,  166;  banks  examined  by,  192; 
appointment  of  bank  examiners  by,  193, 
194,  195;  opposition  of,  to  Banking  De- 
partment, 197;  supervision  of,  over  build- 
ing and  loan  associations,  231,  232,  234, 
235,  257,  258,  259,  260,  265,  266; 
supervision  of,  over  loan  corporations, 
313 

Author's  preface,  ix 

Auto  loan   companies,   account  of,    318-320 

Automobiles,  companies  to  finance  pur- 
chase of,  318-320 

Babbitt,  L.  W.,  appointment  of,  as  bank 
commissioner,   85 

Bainbridge,  M.,  statement  by,  concerning 
Miners'    Banlc,    22,    23 

Baker,  Elihu,  appointment  of,  as  bank 
commissioner,  84;  presence  of,  at  meet- 
ing of  bank  commissioners,  99 ;  election 
of,  as  secretary  of  State  Bank  of  Iowa, 
102,  104;  compensation  of,  104;  ap- 
pointment of,  as  receiver  of  Fort  Madi- 
son branch,  106,  107;  records  signed  by, 
118 

Baltimore  (Maryland),  building  association 
formed  at,   230 

"Bank",  restrictions  on  use  of,  in  titles, 
167,    168 

Bank  acceptances,  use  of,   226 

Bank  charter,  authority  of  Superintendent 
of   Banking  to   refuse  issue  of,    199,    200 

Bank  commissioners  (general  banking 
law),  names  of,  79;  election  of,  79; 
duties  of,  79 ;  abolition  of  office  of,  81 

Bank  Commissioners,  Board  of,  personnel 
of,  84,  85;  duties  of,  85;  meeting  of 
99;    adjournment  of,    101,    102 

Bank  examiners,  pay  of,  190,  191,  193, 
194,    195,    199;    qualifications    of,    191; 

433 


434 


HISTORY   OF   BANKING   IN   IOWA 


appointment  of,  193,  194,  195,  199; 
number  of,   193,   194,  195 

Bank  notes,  number  of,  2 ;  illegal  circula- 
tion of,  6;  importance  of  issue  of,  12, 
46,  47,  89,  90,  126,  issue  of,  13,  35, 
61,  76,  77,  95,  96,  130,  134,  336;  date 
of  redemption  of,  17;  discount  of,  18; 
kinds  of,  59,  60;  substitutes  for,  61-69; 
deposits  for,  77;  withdrawal  of,  77; 
penalty  for  non-redemption  of,  78 ;  de- 
struction of.  78,  98,  99 ;  denominations 
of,  78,  79,  96,  97;  redemption  of,  96, 
110,  111;  description  of,  98;  exchange 
of,  98;  arrival  of,  for  State  Bank,  104, 
105;  high  standing  of  those  issued  by 
State  Bank,  111-114;  tax  on,  114,  115; 
responsibility  for,  126;  fraudulent,  128; 
apportionment  of,  to  national  banks,  143, 
144;  number  of,  issued  by  national 
banks,    145 

Bank  of  Illinois,  branch  of,   at  Galena,   10 

Bank  of  Iowa,  attempt  to  establish,  35,  36, 
37    (see  also   State  Bank  of  Iowa) 

Bank  of  Manchester  (Michigan),  notes  of, 
16,    18 

Bank  of  Missouri,  notes  of,  22 

Bank  of  the  United  States,  First,  reports 
of,   90 

Bank  of  the  United  States,  Second,  re- 
charter  of,  1 ;  effect  of  failure  to  re- 
charter,  2,  5 ;  fight  against,  7 ;  political 
difficulties  of,   124;   end  of,  127 

Bank  v.  Fellows,  decision  on,   224 

Bankers,  responsibility  of,  for  notes,  65; 
criticism  of,  71,  72;  attitude  of,  toward 
Federal  reserve  system,  206,  209-212; 
opposition  of,  to  government  competition, 
304,  305;  opposition  of,  to  postal  savings 
law,  330;  interest  of,  in  schools,  348; 
personal  services  of,  348,  349;  number 
of,  in  military  service,  350;  attitude  of, 
toward  customers,  351;  characterization 
of,  351,  352,  353 ;  need  of  organization 
of,   362 

Bankers  Directory,  statistics  of  banks  in, 
168,    169 

Bankers  Loan  and  Trust  Company  (Sioux 
City),  membership  of,  in  Federal  re- 
serve system,   209 

Bankers  Mortgage  Company  (Des  Moines), 
business   of,    328;    mention   of,    422 

Banking,  economic  and  political  background 
of  history  of,  1-9 ;  condition  of,  in  United 
States  in  the  thirties,  1,  2;  political 
struggle  over,  7;  early  opposition  to,  33; 
prohibition  of,  35-44,  46,  47;  discussion 
of,  in  constitutional  convention  of  1844, 


36-41;  evils  of,  37,  38;  defeat  of  law- 
prohibiting,  39;  proposal  to  submit  char- 
ters for,  to  popular  vote,  40 ;  description 
of,  on  frontier,  45-69;  evolution  of,  48, 
49;  constitutional  authorization  of,  70- 
82;  general  law  concerning,  71,  74-82; 
vote  on  laws  relative  to,  75 ;  firms  car- 
rying on  business  of,  133;  development 
of,  from  1873  to  1921,  144-182;  govern- 
ment regulation  of,  165,  167,  183-203; 
estimate  of,  180-182;  publicity  concern- 
ing, 183-190;  special  types  of,  306-332; 
promotion  of  training  for,  382;  defini- 
tion of,  390 
Banldng,   State  Department  of,   reports  to, 

187,  188,  195,  196;  duties  of,  188;  re- 
ports issued   by,    188,    190;    creation   of, 

188,  197,  198;  examination  of  banks  by, 
192 ;  bank  examiners  appointed  by,  194, 
195;  work  of,  196-203;  employees  of, 
199,   380 

Banking.  Superintendent  of,  supervision 
of,  over  banks,  158;  reports  by,  181; 
bank  reports  transferred  to,  188 ;  crea- 
tion of  office  of,  198;  appointment  of, 
198;  duties  of,  198,  199,  200,  201;  sal- 
ary of,  199,  202;  supervision  of,  over 
farm  credit  corporations,  315;  powers 
of,  380 

Banking,  Superintendent  of.  Deputy,  em- 
Iiloyment  of,   199 ;   pay  of,   199 

Banking  system,   establishment  of,   126-142 

Banks,  opposition  to,  8,  351;  function  of, 
12 ;  attempts  to  secure  charters  for,  35, 
409 ;  discussion  of,  in  constitutional  con- 
vention of  1844,  36-41;  liabilities  of 
stockholders  of,  40;  committee  report 
concerning,  in  constitutional  convention, 
42 ;  arguments  in  favor  of,  44 ;  kinds  of, 
47;  history  of,  in  Mississippi  River 
towns,  49-51;  establishment  of,  in  in- 
terior towns,  51-53;  account  of,  on  Mis- 
souri River,  53,  54;  functions  of,  in 
pioneer  times,  54-57;  function  of,  in  ex- 
change, 55;  offers  of,  for  deposits,  56; 
equipment  of,  57,  58;  failures  of,  in 
1857,  68,  69;  constitutional  authoriza- 
tion of,  70-82;  opposition  of  Governor 
Hempstead  to,  70,  71;  popular  vote  on, 
75;  capital  of,  75,  79,  80,  81;  location 
of,  75,  81,  82;  liability  of,  75,  76;  ac- 
tivities of,  76;  issue  of  notes  by,  76, 
77,  336-338;  system  of  State  control  of, 
126-142,  192,  193,  194,  195,  196;  data 
concerning,  133,  173,  174,  189,  190, 
214,  215;  number  of,  133,  148,  149, 
150,   159,   160,   164,   168,   169,   170,   171, 


INDEX 


435 


173,  174,  180,  181,  202,  204,  353,  361; 
incorporation  of,  135,  136,  137;  reports 
from,  136,  137,  183-190;  assets  of,  147, 
169,  172,  173,  180,  181;  size  of,  160; 
similarity  of,  162;  failures  of,  174,  177- 
182,  203;  consolidation  of,  181;  com- 
munity activities  of,  182,  202,  333-361; 
examination  of,  190-196;  fee  for  examin- 
ation of,  192,  193 ;  clearing  system  for, 
218,  219,  220;  effect  of  Federal  reserve 
system  on,  226-228;  attitude  of,  toward 
building  and  loan  associations,  262;  pur- 
chase of  farm  mortgages  by,  275,  280; 
real  estate  investments  of,  276,  277, 
278;  investment  business  of,  325-329, 
341,  342;  guarantee  of  deposits  in,  329, 
424,  primary  functions  of,  333-341;  de- 
posits in,  334;  interest  rate  paid  by, 
335,  336;  discount  function  of,  338-341; 
secondary  banking  functions  of,  341- 
344;  exchange  business  of,  342,  343; 
fiduciary  services  of,  343 ;  safety  deposit 
business  of,  343,  344;  business  stand- 
ards established  by,  344-346;  agricul- 
tural services  of,  346-348 ;  war  activ- 
ities of,  349,  350;  purchase  of  Liberty 
bonds  by,  350;  popular  attitude  toward, 
351-353;  accessibility  of,  353,  354;  own- 
ership of,  355,  356;  stockholders  of, 
355,  356;  profits  of,  356-359;  personal 
letters  from,  359;  courtesies  of,  to  cus- 
tomers, 359,  360;  publicity  methods  of, 
359-361;  overdrafts  in,  361;  number  of, 
in  Iowa  Bankers  Association,  366;  pro- 
tection of,  374-377;  robberies  of,  376, 
377,  employment  of  time  lock  expert  by, 
377,  378;  right  to  deny  charters  to, 
380;    prohibition   of,    390 

Banks,   private,    (see    Private    banks) 

Banks,   savings,    (see    Savings   banks) 

Banks,   State,    (see   State   banks) 

Banks  and  Banking,  Committee  on,  report 
of,  74 

Banks  and  Insurance,  Commissioner  of, 
recommendation  of  office  of,   197 

Barney,  W.  J.,  and  Company,  early  bank 
of,  49,  50 

Barrett,  Richard,  Miners'  Bank  owned  by, 
24 ;  letters  of,  concerning  Miners'  Bank, 
26 

Battle  Creek,  cattle  business  at,  324,  325; 
banks  in,    354 

Beans,   price  of,   4 

Bechtel,  George  M.,  and  Company  (Daven- 
port), business  of,  326,  328;  mention 
of,   422 


Bedford,  failure  of  First  National  Bank 
at,   178 

Benton,  Thomas  H.,  Jr.,  banking  work  of, 
61 

Bill  holders,  provision  for  payment  of,  7  7. 
78 

Bills,    prohibition    of,    48 

Black  Hawk  County,  denial  to,  of  branch 
of  State  Bank,  106 

Blackburn,  H.  T.,  statement  by,  356;  office 
of,  in  Iowa  Bankers  Association,   370 

Bleakly,  John  L.,  recommendation  of,  con- 
cerning bank  reports,  188;  refusal  of, 
to  permit  Iowa  State  banks  to  join  Fed- 
eral reserve  system,  208 

Bloomington  (Muscatine),  paper  published 
at,    3 

Bloomington  Herald,  party  prejudice  of,  8 

Blue  sky  legislation,  support  of,  by  Iowa 
Bankers  Association,  202;  proposed 
amendment  of,   380 

Blue  sky  stock,   sale  of,   342 

Bolshevism,    support   of,    261 

Bonds,  deposit  of,  as  security,  77,  145; 
purchase  of,  109,  115,  128,  129,  130, 
145;  sale  of,  by  national  banks,  132; 
investments  of  savings  banks  in,  140; 
banks  for  sale  of,  325-329;  storage  of. 
343 ;  work  of  bankers  in  handling  of, 
349,    350 

Bonson,  Richard,  presence  of,  at  meeting 
of  Board  of  Directors,   102 

Booth,  C.  H.,  appointment  of,  as  bank 
commissioner,  84;  presence  of,  at  meet- 
ing  of   bank   commissioners,    99 

Borrowers,  insurance  for,  253,  254 

Borrowing,   reasons  for,   311,   312 

Boster,  J.  W.,  application  of,  for  bank 
charter,    100 

Boston  (Massachusetts),  money  from,  128; 
clearing  system  in  banks   of,   219 

Boundaries,    changes   in,    41 

Boyd,   W.    R.,    article   by,    264 

Boys'  clubs,  promotion  of,  by  bankers,  346 

Bradford  and  Rhodes'  Bank  Directory, 
statistics   given   in,    180 

Branan,  Mr.,  application  of,  for  bank  char- 
ter,   100 

Branch,  J.  H.,  address  by,  352;  office  of, 
in  Iowa  Banlcers  Association,  370 

Branches  of  State  Bank  of  Iowa,  organiza- 
tion of,  85 ;  subscriptions  to  stock  of, 
87;  number  of,  87;  provisions  concern- 
ing, 87,  88,  89,  90,  91,  92,  93;  liability 
of  stockholders  of,  88;  management  of, 
89,  90 ;  reports  of,  90 ;  description  of 
notes   of,    98 ;    applications  for,    99,    100, 


436 


HISTORY    OF    BANKING    IN    IOWA 


105,  106;  list  of,  101,  133,  134;  as- 
sessments on,  104;  supervision  of,  106, 
107;  accounts  of,  107;  aid  of,  to  State, 
during  Civil  War,  108,  109;  conversion 
of,  into  national  banks,  118,  134;  tablo 
showing  combined  financial  condition  of, 
119,  120;  profits  of  121,  122,  123 
Bribery,     charges    of,     concerning    Miners' 

Bank,    25-27 
"Brindle-pup"    currency,    60 
Brooklyn  (New  York),  building  association 

formed   at,    230 
Brooks,    J.   T.,    office  of,   in  Iowa   Bankers 
Association,    370 

Brownsville  (Illinois),  branch  bank  at,  400 

Brownsville   (Nebraska),  bank  at,   62 

Bryan,   B.   S.,   failure  of,   52 

Bryan,  P.  Gad.,  appointment  of,  as  bank 
commissioner,    79 

Building  and  loan  associations,  definition 
of.  229;  origin  of,  229,  230;  history  of, 
229-266;  number  of,  230,  231,  232,  233, 
234;  legislation  concerning,  231;  types 
of,  232,  236;  capital  of,  236;  member- 
ship in,  236,  237;  issue  of  shares  of, 
237-239;  distribution  of  profits  of,  239- 
241,  242,  243,  244;  expenses  of,  240; 
losses  of,  240,  241;  withdrawal  of  mem- 
bers of,  241-244;  plan  of  making  loans 
employed  by,  244-247;  penalties  of,  for 
non-payment  of  loans,  247,  248;  repay- 
ment of  loans  to,  247-251 ;  rates  of  in- 
terest charged  by,  249,  250,  251;  loans 
of,  to  farmers,  251-253;  insurance  for 
borrowers  from,  253,  254;  management 
of,  254-256;  officers  of,  254-256;  re- 
strictions on,  256,  257,  258,  259,  260; 
State  supervision  of,  256-260 ;  reports 
made  by,  257,  258,  259,  260;  securities 
furnished  by,  259;  benefits  from,  260- 
262;  taxation  of,  264,  265;  estimate  of, 
265,   266 

Building  and  loan  leagues,  organization  of, 
263,    264 

Burglars,  rewards  for  apprehension  of, 
375,    376 

Burglary,  protection  against,  375,  376;  in- 
surance for,  379 

Burlington,  meeting  of  legislature  at,  14, 
19,  36;  early  bank  in,  49;  early  import- 
ance of.  49;  scrip  of,  66;  branch  of 
State  Bank  at.  101 ;  incorporation  of 
banks  at,  136;  meeting  of  bankers  at 
370 

Burlington  Branch  of  State  Bank,  organ- 
ization   of,    101;    charges    against.    111; 


conversion  of,  into  national  bank,  llrf; 
profits   of,    122 

Burlington  Uawkeye,  The,  suspension  of 
publication  of,   4 

Burlington  Savings  Bank,  incorporation 
of,    136;   records  of,   402 

Burns,  Wm.  J.,  agency,  employment  of,  by 
Iowa    Bankers    Association,    375,    377 

Burrows  and  Prettyman,  business  activ- 
ities of,  66,  67;  scrip  issued  by,  66,  67, 
69 

Burton,  Pinley,  and  Company,  early  bank 
of,   50 

Bush.    L.   H.,    statement  by,    285,   286 

Business  training,  advantages  of,  262;  em- 
phasis on,  by  banks,    344,    345 

Butter,  price  of,  4 

Calderwood,  M.  H..  office  of,  in  Iowa 
Bankers  Association,   370 

California,  law  of,  relative  to  private 
banks.  167;  prohibition  of  banks  in,  390 

Callanan.  James,  banking  interests  of,  64, 
65 

Camanche,  application  from,  for  branch 
of    State   Bank,    99,    100 

Canada,  money  from,  128 

Canfield  Bros.,  Investment  Bankers  (Cedar 
Rapids),   mention   of,   422 

Capital,  amount  of.  75,  79,  80.  81.  87,  129, 
134.  137,  146.  153.  154.  155,  156,  167, 
173,  174,  175.  236,  289,  294,  295,  297, 
427;  requirements  of.  79,  80,  81,  87,  129, 
134  137,  138,  146,  151,  152,  153,  154, 
155,  156,  158,  159,  161,  167,  223,  236, 
289,  294,  295,  297;  statistics  of,  for 
Iowa  national  banks,  149,  150;  report 
on.  185;  freedom  of,  from  taxation,  in 
Federal  reserve  system  members,  221, 
222 

Capital  Issues  Committee,  support  of,  by 
bankers,   381 

Capital   stock,   levy  for,    151 

Capitol    (Iowa   City),    cost  of,   388 

Carpenter,  Cyrus  C,  recommendation  of, 
concerning   savings   banks,    138 

Carpenter,  H.  M.,  office  of,  in  Iowa  Bank- 
ers  Association,   370 

Carpenter,  S.  D.,  part  of,  in  banking  busi- 
ness, 52 ;  trip  described  by,  55 ;  bank  de- 
scribed by,  56;  comment  by,  on  bank 
failures,    68 

CarroU,  B.  F.,  circular  from,  relative  to 
bank  reserves,  176;  statement  by,  con- 
cerning bank  reports,  187,  188;  recom- 
mendation of,  concerning  bank  examina- 
tions.  196 


INDEX 


437 


Carroll,  failure  of  First  National  Bank  at, 
178 

Casady,  P.  M.,  presence  of,  at  meeting  of 
Board  of  Directors,  102 

Casady,  Simon,  office  of,  in  Iowa  Bankers 
Association,    370 

Cash  reserve,  requirement  of,  152,  153, 
157,  217,  339;  lowering  of,  207,  217 
(see  also  Reserve) 

Cashiers  checks,   use  of,   177 

Cassady,  Myers,  and  Moore,  early  bank  of, 
54 

"Catamount"   money,    6 

Cattell,  J.  W.,  recommendation  of,  concern- 
ing banking  law,  165;  recommendation 
by,  concerning  examination  of  banks, 
192 

Cattle,  prices  of,  5;  loans  on,  316,  320- 
325,   347;   number  of,  320 

Cattle  loan  companies,  activities  of,  320- 
325;  types  of,  321,  322;  business  of, 
322,    323,   324;   list  of,   in  Iowa,   421 

"Cattle  Paper",  address  on,  324 

Cedar  Falls,  application  from,  for  branch 
of  State  Bank,  106;  failure  of  First 
National  Bank  at,   178 

Cedar  Rapids,  early  banks  of,  52,  53;  banik 
notes  circulated  in,  64 ;  application  from, 
for  branch  of  State  Bank,  105,  106; 
clearing  house  association  in,  175,  176, 
177;  reserve  requirements  of  banks  in, 
217;  organization  of  buUding  and  loan 
association  at,  231;  rate  of  interest 
charged  by  building  and  loan  association 
at,  250;  statistics  concerning  Morris 
Plan  company  at,  307,  309,  311,  312; 
profits  of  banks  in,  357;  cost  to,  of  en- 
tertaining bankers,  367;  meeting  of 
bankers  at,  370;  investment  bankers  at, 
422 

Cedar  Rapids  Morris  Plan  Company,  occu- 
pations and  nationality  of  borrowers 
from,  312;  losses  of,  312,  313;  profits 
of,  313;  directorate  of,  314 

Central  Iowa  Joint  Stock  Land  Bank  (Des 
Moines),   charter  to,  295 

Cereals,   production   of,   in   Iowa,   46 

Chariton,  failure  of  First  National  Bank 
at,  178 

Charleston,  attempt  to  establish  bank  in,  35 

Charruaud  and  Nichols,  early  bank  of,  51, 
52 

Charts,   147,  164,   170 

Chase,  Salmon  P.,  national  currency  ad- 
vocated by,  127,  128,  129;  disappoint- 
ment of,  in  number  of  national  banks, 
131 


Chassell,  E.  D.,  opinion  of,  relative  to  joint 
stock  land  banks,  296;  debate  by,  299 

Chattel  mortgages,  taking  of,   314 

Checking  accounts,  handling  of,   336 

Checks,  collection  of,  218,  219,  220,  221; 
use  of,   336,   337,   338 

Chicago  (Illinois),  location  of  reserve 
bank  of  seventh  Federal  reserve  dis- 
trict at,  206;  profits  of  Federal  Reserve 
Bank  at,  210;  bankers  conference  at, 
216;  meeting  at,  263;  joint  stock  land 
bank  at,  295 ;  investment  banks  in,  325, 
326 

Circulating  notes,  payment  for,  17 

Circulation,  decrease  in,  2 ;  importance  of, 
to  early  banks,  12,  13;  prohibition  of 
issue  of,  48;  limitation  on,  95,  96,  97, 
98,  143,  144;  retirement  of,  by  State 
Bank,  114-118;  restriction  on,  143,  144; 
profits  on,  144,  154;  increase  in  amount 
of,  146,  148;  tax  on,  184;  issue  of,  336 

City  scrip,  use  of,  65,  66 

Civil  War,  financial  effects  of,  96;  aid  of 
State  Bank  in,  108,  109 

Clark,  Ezekiel,  appointment  of,  as  bank 
commissioner,  84 ;  election  of,  as  chair- 
man of  Board  of  Directors,  99 ;  presence 
of,  at  meeting  of  bank  commissioners, 
99;  papers  surrendered  by,  to  new  direc- 
tors, 102;  financial  assistance  offered  by, 
108 

Clark,  Sam,  application  of,  for  bank  char- 
ter,  100 

Clarke,  James,  attitude  of,  toward  State 
organization,   41 

Clarke,  Wm.  Penn,  argument  of,  in  favor 
of  banks,   44;   prophecy  of,   68 

Clay,  Henry,  United  States  Bank  sup- 
ported by,    1,   7 

Clay,  John,  and  Company,  business  of,  321 

Clayton  Act,  freedom  of  State  banks  from, 
222 

Clayton  County,  petition  from,  concerning 
Miners'  Bank,  28 

Clearing  house  associations,  account  of, 
175-177;   exchanges  in,   176 

Clearing  system  of  Federal  reserve  banks, 
218,  219,  220,  221,  226 

Clearings,   amount  of,   219 

Cleveland  (Ohio),  meeting  of  United  States 
League  of  Local  Building  and  Loan  As- 
sociations at,   233,   234 

Clinton,  application  from,  for  branch  of 
State  Bank,  100;  clearing  house  associa- 
tion in,  175,  176;  organization  of  first 
building  and  loan  association  at,  231 ; 
meeting  of  bankers  at,   370 


438 


HISTORY    OF    BANKING    IN    IOWA 


Clinton  County,  petition  from,  concerning 
Miners'  Bank,  27;  early  bank  in,  51 

Code  of  1S51,  provision  in,  prohibiting 
banks,  48 ;  adoption  of  sections  of,  by 
Nebraska,    61 

Code  of  1873,  provisions  in,  concerning 
banks,    137,   138,   143,   150,   186,   192 

Code  of  1897,  provisions  in,  concerning 
banks,  151,  152,  157,  159,  160,  187; 
building  and  loan  association  defined  by, 
229 

Coins,  lack  of,   6;  kinds  of,  60,  61 

Collateral  security,  use  of,  by  State  Bank 
branches,   93 

Collection,   activities  of  early  banks  in,    56 

Colleges,  purchase  of  mortgages  by,  282, 
283,   284 

Colorado,  law  of,  relative  to  private  banks, 
167 

Commercial  banks,  farm  mortgage  business 
of,    275-278 

Commercial  enterprises,  promotion  of,  by 
banks,   345,   346 

Commercial  paper,  investments  in,  by  sav- 
ings bank,  140;  discount  of,  338-341 

Commissioners,  Board  of,  of  State  Bank, 
applications  rejected  by,  100,  101,  105; 
adjournment  of,   101,   102 

Committee  of  the  Whole,  debate  in,  73 

Community,  relation  of  banks  to,  333-361 

Comptroller  of  the  Currency,  creation  of 
oflSce  of,  129;  study  of  banking  issued 
by,  133;  reports  to,  155,  168,  175,  176, 
183,  184,  187,  188,  189,  190,  195,  196, 
357,  358;  examination  of  banks  by,  190, 
191,  192;  petition  to,  relative  to  new- 
banks,  201;  proposal  to  abolish  office  of, 
210;  interest  rates  reported  by,  335; 
bank  applications  rejected  by,  409 

Congress,  attitude  of,  toward  Miners'  Bank 
of  Dubuque,  10 

Connell,  John,  premium  allowed  to,  on  gold 
deposit,    123 

Constitution  of  1844,  drafting  of,  36-41; 
defeat  of,  41 

Constitution  of  1846,  significance  of  vote 
on,  35;  provisions  in,  concerning  banks, 
41-44,  47;  banking  prohibited  by,  43, 
44,  46,  47;  ratification  of,  43,  44;  sig- 
nificance of  vote  on,  47 ;  dissatisfaction 
with,    70 

Constitutional  convention  of  1844,  debate 
of  members  of,  over  banking,  36-41 

Constitutional  convention  of  1846,  election 
of  delegates  to,  41,  42 ;  debate  in,  on 
banking,  47 

Constitutional    convention    of    1857,    meet- 


ing of,  71;  composition  of,  71;  debate 
in,  over  banks,  71-74 

Cook,  Ebenezer,  opinions  of,  concerning 
banks,  40;  banking  interests  of,  62; 
demonstration   against,    69 

Cook,  Sargent,  and  Cook,  early  bank  of, 
52 ;  bank  stock  owned  by,  63 

Cook,  Sargent,  and  Downey,  early  bank  of, 
51;   bank  stock  owned  by,   63 

Cook  and  Sargent,  early  bank  of,  49 ;  land 
agency  of,  50;  branch  bank  of,  50,  51; 
bank  building  of,  50,  130;  bank  stock 
owned  by,  63 ;  suspension  of,  68 ;  dem- 
onstration against,   69 

Coolbaugh,  W.  F.,  financial  support  of- 
fered  by,    108 

Coolbaugh  and  Brooks,  early  bank  of,  49, 
50 

Cooley,  D.  N.,  office  of,  in  Iowa  Bankers 
Association,    370 

Cooperative  banks,   230 

Copeland,  Mr.,  application  of,  for  bank 
charter,   100 

Copeland,  H.  D.,  opinion  of,  concerning 
regulation  of  private  banks,  166 

Corbin,  Austin,  position  of,  as  bank  presi- 
dent,  50 

Corey,  M.  L.,  debate  by,  299 

Corn,  price  of,  5;  production  of,  46,  320; 
prize  for,    346 

Corning,  failure  of  First  National  Bank  at, 
178 

Corporation  scrip,  use  of,  for  money,  66-88 

Corporations,  discussion  of,  in  constitu- 
tional convention  of  1844,  36;  article  on, 
in  Constitution  of  1844,  40,  41;  char- 
ters granted  to,  by  legislature,  47,  48; 
general  law  on,  47,  48 

Correspondent  banks,  advantages  of,  222, 
223 

Corwin,  O.  M.,  address  by,  305 

Council,   dinner  for,    368 

Council  Bluffs,  branch  of  Greene  and 
Weare  bank  at,  52 ;  early  banks  in,  53 ; 
bank  conditions  at,  60 ;  circulation  of 
bank  notes  at,  64 ;  application  from,  for 
branch  of  State  Bank,  99,  100;  branch 
of  State  Bank  at,  101;  clearing  house 
association  in,  175,  176,  177;  land  office 
at,  275;  meeting  of  bankers  at,  370 

Council  Bluffs  Branch  of  State  Bank,  or- 
ganization of,  101;  profits  of,  122 

Counterfeit  money,  use  of,  4,  128 

Counties,    debts   of,    326 

County  agents,  bankers  in  favor  of,  346, 
380 


INDEX 


439 


County  bankers  associations,  organization 
of,   372,   373 

County  recorder,  articles  of  incorporation 
to  be  filed  with,   151 

County  scrip,  use  of,   65,   66 

Credit,  necessity  of,  92,  93;  creation  of, 
338,   339 

Crimean  War,  effect  of,  46 

Criminal  bureau,  creation  of,  376 

Crisis  of  1920,  service  of  Federal  reserve 
system  during,  213-217 

Crop  Estimates,  Federal  Bureau  of,  report 
of,   269 

Culbertson  and  Reno,  early  bank  of,  51 

Cummins,  A.  B.,   address  by,   367 

Currency,  lack  of,  2,  3;  quality  of,  6; 
general  state  of,  58-61;  kinds  of,  in 
Iowa,  59,  60;  substitutes  for,  61-69; 
opposition  to  illegal  forms  of,  69 ;  atti- 
tude of  State  Bank  toward,  110-114; 
importance  of,  124,  125;  need  of  uni- 
formity of,  127,  128 ;  demand  for  addi- 
tional,  144;  issue  of,  227 

Curtin,  E.  J.,  opinion  of,  concerning  regu- 
lation of  private  banks,  166,  167;  office 
of,  in  Iowa  Bankers  Association,  370 

Customers,  courtesies  to,  359,  860 

Dairy  products,  production  of,  in  Iowa,  46 

Dam  at  Iowa  City,  pay  of  workmen  on,   5 

Darling,  J.  N.,  cartoon  by,  177 

Dart,  William  S.,  appointment  of,  as  bank 
commissioner,  84 ;  presence  of,  at  meet- 
ing of  bank  commissioners,  99 

Davenport,  F.  E.,  and  Company,  contract 
with,   378 

Davenport,  George  L.,  appointment  of,  as 
bank  commissioner,    79 

Davenport,  financial  conditions  at,  4;  at- 
tempt to  establish  bank  at,  35;  railroad 
to,  46;  early  bank  in,  49,  50;  bank 
notes  circulated  in,  63 ;  corporation 
scrip  issued  at,  66 ;  kinds  of  money  in, 
69 ;  mob  in,  69 ;  application  from,  for 
branch  of  State  Bank,  100;  branch  of 
State  Bank  at,  101,  397;  meeting  of 
State  Bank  directors  at,  117,  118,  123; 
first  national  bank  established  in,  130; 
sale  of  bonds  by  First  National  Bank  of, 
132;  incorporation  of  banks  at,  136; 
clearing  house  association  in,  175,  176, 
177;  statistics  concerning  Morris  Plan 
company  at,  307;  investment  company 
at,  326,  422;  entertainment  provided  by, 
for  Iowa  Bankers  Association,  366,  367; 
tour  of,  367;  meeting  of  bankers  at,  370 


Davenport,  First  National  Bank  of,  presi- 
dent of,   50 

Davenport  Branch  of  State  Bank,  profits 
of,  122 

Davenport  Business  Men's  Association,  use 
of   rooms   of,    366,    367 

Davenport  Outing  Club,  open  house  at,  367 

Davenport  Savings  Institution,  incorpora- 
tion of,  136 

Davis,  Timothy,  testimony  of,  concerning 
Miners'  Bank,  23,   24,   25 

Dayton  (Ohio)  plan  of  Mutual  Home  Asso- 
ciation of,   237,   238,   239 

Dayton  plan  of  issuing  shares,  237,  238, 
239 

Debenture  bonds,    279,    280,    282 

Debenture  companies,  operations  of,  278- 
280;   dissatisfaction  with,   297 

Debt,  amount  of,  in  Iowa,  326 

Decorah,  failure  of  First  National  Bank  at, 
178 ;   investment  bankers   at,   422 

Delaware  County,  petition  from,  concern- 
ing Miners'   Bank,   28 

Delaware  County  Bankers  Association,  or- 
ganization  of,    372 

Darning,  J.  K.,  address  by,  364;  recep- 
tion by,  368;  office  of,  in  Iowa  Bankers 
Association,    370 

Democrats,  attitude  of,  toward  United 
States  Bank,  1,  7;  attitude  of,  toward 
banks,  8,  36,  39,  42,  43,  47;  attitude 
of,  toward  Miners'  Bank,  33,  34;  num- 
ber of,  in  convention  in  1857,  71;  finan- 
cial support  offered  by,  108;  guarantee 
of  bank  deposits  favored  by,  329;  nick- 
name for,   385 

Depositors,  protection  of,  151,  158;  losses 
of,   177,   178,   179,   181,   182 

Deposits,  scarcity  of,  56;  regulation  of, 
90;  limitations  on,  139,  161;  statistics 
of,  for  Iowa  bank,  149,  150,  173,  214, 
334,  335;  withdrawal  of,  from  savings 
banks,  157;  decline  in,  for  Iowa,  174; 
guarantee  of,  329,  381,  424;  interest  on, 
335;  checking  on,  336;  creation  of,  336, 
337,    338,    339 

Des  Moines,  early  banks  at,  52 ;  branch  of 
Greene  and  Weare  bank  at,  52 ;  circula- 
tion of  bank  notes  in,  63,  64;  applica- 
tion from,  for  branch  of  State  Bank, 
100;  branch  of  State  Bank  at,  101,  397"; 
clearing  house  association  in,  175,  176, 
177;  reserve  requirements  of  banks  in, 
217;  bad  reputation  of  building  and 
loan  associations  at,  235;  interest  rate  of 
building  and  loan  association  at,  250; 
meeting  at^  280;   joint  stock  land  banks 


440 


HISTORY    OF    BANKING    IN    IOWA 


at,  295;  facts  concerning  Morris  Plan 
company  at,  307,  313;  investment  com- 
pany at,  328,  422;  profits  of  banks  in, 
357;  meeting  of  bankers  at,  365,  366, 
367,  370;  headquarters  of  Iowa  Bank- 
ers Association  at,  369,  371;  cattle  loan 
companies   at,    421 

Des  Moines  Branch  of  State  Bank,  organ- 
ization of,  101;  representative  of,  102; 
conversion  of,  into  national  bank,  118; 
profits  of,    122 

Des  Moines  County,  petition  from,  con- 
cerning Miners'  Bank,  27 

Des  Moines  County  Savings  Bank  (Bur- 
lington), incorporation  of,  136;  records 
of,  402 

Des  Moines  Joint  Stock  Land  Bank,  char- 
ter  to,    295 

Des  Moines  Morris  Plan  company,  profits 
of,    313 

Des  Moines  Register  and  Leader,  cartoon 
in,    177 

De  Soto  (Nebraska),  Bank  of,  incorpora- 
tion of,  64;   value  of  notes  of,  64 

Detroit  (Michigan),  certificates  of  deposit 
in  bank  at,  16,  17;  specie  deposit  in 
bank  at,   18,   19 

Dewey,  Mr.,  comment  by,  on  counterfeit 
money,  128 

Dexter,  Seymour,  opinion  of,  relative  to 
building  and  loan  associations,  233,  234 

"Diamond  Contracts",  260 

Dillon,  G.  D.,  testimony  of,  concerning 
Miners'    Bank,    17,    386,    387 

"Diminishing  Term  Policy",  253 

Dinwiddle,  J.  M.,  report  by,  364;  services 
of,  for  Iowa  Bankers  Association,  364, 
365;  services  of,  as  Secretary  of  Iowa 
Bankers   Association,   369,   371 

Directors,  Board  of,  of  State  Bank,  per- 
sonnel of,  86;  appointment  of,  86;  votes 
of,  86;  compensation  of,  86,  104;  duties 
of,  86,  87,  102,  103,  104,  105,  106; 
reports  by,  90,  91;  worn  notes  burned 
by,  98,  99;  meeting  of,  99,  100,  101, 
102,  103,  104,  105,  117,  118;  officers 
of,  103;  decision  of,  concerning  note  re- 
demption, 110,  111;  attitude  of,  toward 
national  banking  system,   115,   116 

Discount,  rate  of,  18,  213,  216;  unimpor- 
tance of,  in  early  banks,  56;  function  of 
banks  in  relation  to,  338-341 

Discount  rates,  increase  in,  213;  publica- 
tion of,   226 

Dividends  of  branches  of  State  Bank,  121, 
122,  123 

Domestic    building    and    loan    associations, 


number  of,  in  Iowa,  232,  234;  field  of, 
234;  fees  for,  235,  236 

Domestic  exchange,  provision  for,  342,  343 

Domestic-local  building  and  loan  associa- 
tions, number  of,  in  Iowa,  232  234; 
field  of,  234;  reincorporation  of,  268, 
259 

Downey,  H.  D.,  banking  interests  of,  62 

Drainage  bonds,  approval  of,  for  savings 
banks,   156 

Dubuque,  Julien,  mines  of,  10 

Dubuque,  lead  mines  at,  10;  application  of 
citizens  of,  for  bank  charter,  10 ;  history 
of  Miners'  Bank  of,  10-34;  early  banks  in, 
49,  50;  application  from,  for  branch  of 
State  Bank,  100;  branch  of  State  Bank 
at,  101,  397;  clearing  house  association 
in,  175,  176;  failure  of  Commercial  Na- 
tional Bank  at,  178;  meeting  of  bankers 
at,  211,  364,  370;  reserve  requirements 
of  banks  in,  217;  profits  of  banks  in, 
357;  petition  signed  by  residents  of, 
886;   population  of,    397 

Dubuque  Branch  of  State  Bank,  organiza- 
tion of,  101;  representative  of,  102; 
money  loaned  to  State  by,  109;  profits 
of,  122 

Dubuque  County,  memorial  circulated  in, 
concerning  Miners'  Bank,  27;  petition 
from,    concerning   Miners'    Bank,    28 

Dubuque  Herald,  comment  in,  concerning 
war  work  of  State  Bank,   109 

Duton,  J.  W.,  appointment  of,  as  bank 
commissioner,    84 

Easton,  J.  D.,  office  of,  in  Iowa  Bankers 
Association,    370 

Eaton,  Geo.  P.,  offer  of,  concerning  Fort 
Madison  branch,  107 

Edge  Act,  foreign  trade  promoted  by,  315 

Edgington,  Edward  T.,  appointment  of,  as 
bank  commissioner,  85;  presence  of,  at 
meeting  of  bank  commissioners,    99 

Editor's  introduction,  vii 

Edwards,  J.  L.,  office  of,  in  Iowa  Bankers 
Association,  370 

Edwardsville  (Illinois),  branch  bank  at, 
400 

Eighth  Federal  farm  loan  district,  288,  289 

Elkader,  First  National  Bank  at,  351 

Ely,  John,  address  by,  391 

Emerson,  J.  H.,  argument  of,  concerning 
banks,    74 

England,  loan  associations  in,  229,  230 

English  coins,  use  of,  in  Iowa,  60,  61 

Epperson,  Frank,  office  of,  in  Iowa  Bank- 
ers  Association,   370 


INDEX 


441 


Equitable  Life  Insurance  Company  of 
Iowa,   vice  president  of,   283,   285 

Estherville,  clearing  house  association  in, 
175 

Everson,   Norman,   early  bank  of,   53 

Examination  of  banks,  190-196 

Excess  profits  tax,  opposition  of  bankers 
to,   381 

Exchange,  functions  of  early  banks  rela- 
tive to,  55,  56;  premium  on,  68;  profits 
on,  220,  221;  business  of  banks  in,  342, 
343 

Executive  Council,  building  and  loan  asso- 
ciations to  be  approved  by,  256,  257, 
259 

Fairfield,   early  bank  in,   53 

Fales,  J.  T.,  testimony  of,  concerning 
Miners'  Bank,  24,  25 

Farley,  Mr.,  mention  of,  25 

Farm  credit  corporations,  purpose  of,  314, 
315;  discussion  of,  314-318;  bonds  of, 
315,  316;  debentures  of,  317 

Farm  demonstrators,  bankers  in  favor  of, 
346 

Farm  land,  value  of,  in  Iowa,  268-270 

Farm  Land  Mortgage  and  Debenture  Com- 
pany of  Cedar  Bapids,  prospectus  of, 
278;   business  of,    279 

Farm  loan  associations,  relation  of,  to  Fed- 
eral land  banks,   289,   290,   293,   294 

Farm  Loan  Board  (see  Federal  Farm  Loan 
Board) 

Farm  loan  registrar,  mortgages  held  by, 
292;   bonds  in  care  of,  295 

Farm   loans,    251-253 

Farmi  Management  of  the  United  States 
Department  of  Agriculture,  Office  of,  sur- 
vey by,  269 

Farm  mortgage  bankers,  associations  of, 
267;   statement  to,  286 

Farm  Mortgage  Bankers  Association  of 
America,  secretary  of,  299 ;  suit  brought 
by,   300 

Farm  mortgage  banking,   267-305 

Farm  mortgage  banks,  proposed  State,  287 

Farm  mortgage  companies,  275,   280-282 

Farm  mortgages,  statistics  of,  270-274; 
amount  of,  271,  272,  273,  274;  early 
history  of,  274-276;  purchasers  of,  275, 
282-284;  interest  rate  on,  284,  285; 
foreclosures  of,  286,  287;  banks  to  have 
charge  of,   287 

Farm  products,  marketing  of,  317 

Farm  property,  table  showing  value  of,  268 

Farm  sales,  assistance  of  bankers  at,  347, 
348 


Farmer-banker    conferences,    212,    216 

Farmers,  difficulties  of,  in  early  Iowa,  2,  3, 
4;  dissatisfaction  of,  216;  loans  to,  251- 
253,  290,  291,  340;  banking  connec- 
tions of,  278,  337;  accounts  kept  by, 
345;  attitude  of,  toward  bankers,  352; 
banks  owned  by,  356 

Farmers  Branch  of  the  State  Bank 
(Maquoketa),  charter  of,  101 

Farmers  Loan  and  Trust  Company  (Sioux 
City),  connection  of,  with  joint  stock 
land  bank,   298 

Farms,  size  of,  45,  46,  274;  operation  of, 
271,  272;  assistance  in  purchase  of,  347 

"Feasibility  of  State  Control  and  Examina- 
tion of  Private  Banks,  The,"  paper  on, 
166 

Federal  Cattle  Loan  Company  (Des 
Moines),  mention  of,  421 

Federal  cooperative  bank,  proposal  for, 
264 

Federal  District  Court  (Kansas  City),  case 
tried  in,   300 

Federal  farm  loan  banks,  purchase  of 
bonds  of,   300,   301 

Federal  Farm  Loan  Board,  organization  of, 
288;  duties  of,  289,  290,  292;  decision 
of,  298;  order  of,  300;  legislation  asked 
by,  300,  301 

Federal  Farm  Loan  Bureau,  expenses  of, 
290 

Federal  farm  loan   districts,   288,   289 

Federal  farm  loan  system,  establishment  of, 
267,  288;  plan  of,  288-294;  tax  ex- 
emption of,  298-303;   effects  of,   303-305 

Federal  home  bureau,  proposal  for,  264 

Federal  Land  Bank  of  Omaha,  capital  of, 
289;  stock  of,  289;  loans  by,  291,  293, 
303;  organization  of,  293;  president  of, 
293;  officers  of,  299 

Federal  land  banks,  plan  of,  289;  capital 
of,  289,  290;  stock  of,  289,  290;  govern- 
ment subsidy  to,  290;  loans  by,  290, 
291,  301;  interest  rates  of,  291,  292, 
303,  304;  bonds  issued  by,  292,  293; 
legal  difficulties  of,  300;  constitutionality 
of  tax  exemption  for  bonds  of,  299,  300, 
301,   302,   303 

Federal  Reserve  Act,  passage  of,  129,  204, 
205,  206;  restrictions  removed  by,  134, 
148;  provision  in,  relative  to  examina- 
tions, 191,  192;  opposition  to,  205, 
206;  provisions  of,  concerning  member- 
ship, 207;  amendments  to,  207,  208,  216, 
222;  criticism  of,  209,  210;  praise  of, 
211;  provisions  of,  224,  225,  227;  loans 
on  real  estate  permitted  by,  276,  277 


442 


HISTORY   OF   BANKING   IN   IOWA 


Federal  Reserve  Bank  of  Chicago,  Iowa 
served  by,  206;  president  of,  212;  re- 
discount service  of,  215,  216,  324;  dis- 
count rates  of,  216;  part  of,  in  farmer- 
banker  conferences,  216;  participation  of 
officers  of,  in  conference,  216;  reserves 
in,  217;  efforts  of,  to  secure  par  clear- 
ings, 219,  220,  221;  collection  of  checks 
by,  220;  assistance  of,  in  sale  of  war 
bonds,   349 

Federal  reserve  banks,  examination  of, 
192;  branches  of,  206;  deposits  in,  207, 
208;  State  banks  given  right  to  pur- 
chase stock  of,  208;  cost  of  operation  of, 
210;  profits  of,  210;  clearing  account 
with,  219;  earnings  of,  222;  beginning 
of  operation  of,  227;  fi.nancial  statements 
requested  by,    345 

Federal  Reserve  Board,  Iowa  banks  listed 
by,  169;  supervision  of,  over  State  bank 
members,  207,  208 ;  notice  of  with- 
drawal sent  to,  208;  Governor  of,  212, 
problem  of,  relative  to  discount  rates, 
213;  assistance  of,  to  Iowa  banks,  217; 
policy  of,  relative  to  trust  company  pow- 
ers, 224,  225;  war  work  of,  227,  228 

Federal  Reserve  Conmiittee,  formation  of, 
212 

Federal  reserve  system.  State  banks  in, 
152,  153;  savings  banks  in,  157;  estab- 
lishment of,  204,  205,  206;  organiza- 
tion of,  206;  membership  in,  207-209, 
212;  changes  in,  207,  208,  381;  defects 
of,  209;  attitude  of  Iowa  bankers  to- 
ward, 209-212,  304;  praise  of,  212, 
228 ;  service  of,  during  post  war  crisis, 
213-217;  reserve  requirements  in,  217; 
advantages  and  disadvantages  of  State 
bank  membership  in,  217-223 ;  redis- 
count service  of,  218,  341;  clearing  and 
collection  system  of,  218,  219,  220, 
221,  343;  tax-free  capital  stock  of 
banks  in,  221;  right  of  withdrawal  from, 
222;  effect  of,  on  Iowa  banking,  226- 
228 ;  benefits  of,  during  World  War,  227, 
228;  deposits  in  banks  in,  331;  issue  of 
circulating  medium  by,  336 

Felkner,  Henry,  minority  report  offered  by, 
26,   27 

Fenton,  W.  T.,  office  of,  in  Iowa  Bankers 
Association,   363 

Fidelity  insurance,  amount  of,  379 

Fiduciary  powers,  provision  of,  for  loan 
and  trust  companies,  161,  162;  exten- 
sion of,  to  national  banks,   224,   225 

Fiduciary  services  of  banks,   343 


Fifteenth  General  Assembly,  saving^s  bank 
law  enacted  by,  138 

Fifth  Legislative  Assembly,  attitude  of,  to- 
ward Miners'  Bank,  24 

Financial  Age,  editor  of,  209 

Financial  statements,  requests  for,  345 

Fines,  use  of,  by  building  and  loan  associa- 
tions,  247 

"Finn  BiU",  debate  on,  165,  166 

First  Joint  Stock  Land  Bank  of  Ohicago, 
loans   by,    295 

First  Joint  Stock  Land  Bank  of  Minneap- 
olis,  charter  to,  295 

First  National  Bank  of  Davenport,  presi- 
dent of,  50;  establishment  of,  130,  131; 
activity  of,  in  sale  of  bonds,  132;  aux- 
iliary of,    136 

First  National  Bank  of  Ida  Grove,  failure 
of,   177,   178 

First  National  Bank  of  Iowa  City,  estab- 
lishment of,  131;  activities  of,  132 

First  National  Bank  of  Lyons,  51 

First  National  Bank  of  Sioux  City,  restora- 
tion of,   177,   178 

First  National  Bank  of  Washington 
(Iowa),    organization   of,    118 

First  National  Bank  of  Washington  (D. 
C),  first  national  bank  notes  engraved 
for,   130 

Florence  (Nebraska),  Bank  of,  charter  of, 
62 ;  history  of,  62,  63 ;  circulation  of 
notes  of,  63,  64,  69;  redemption  of 
notes  of,  69 

Florida,  banks  prohibited  in,   390 

Fontanelle,  Bank  of,  owners  of,  62 ;  circu- 
lation of  notes  of,  64 

Ford  plant,   labor  turn-over  at,   261 

Foreclosures,  record  of,  286,   287 

Foreign  building  and  loan  associations, 
number  of,  in  Iowa,  232,  234;  field  of, 
234;  restrictions  on,  235;  fees  of,  235, 
236;   securities  required  of,   259 

Foreign  coins,  prohibition  of,  as  legal  ten- 
der, 6 ;  prevalence  of,  in  Iowa,  60,  61 

Foreign  exchange,  provision  for,  342,  343 

Fort  Des  Moines,  branch  bank  of  Cook  and 
Sargent  at,  50;  early  banks  at,   52 

Fort  Dodge,  branch  of  Greene  and  Weare 
bank  at,  52;  land  office  at,  53,  275;  de- 
scription of  bank  at,  55;  offer  of  bank 
of,  for  deposits,  56;  circulation  of  bank 
notes  of,  64;  clearing  house  association 
in,  175;  meeting  of  bankers  at,  363,  370 

Fort  Madison,  first  bank  of,  51;  branch  of 
State  Bank  at,   101 

Port   Madison    Branch   of    State   Bank,   or- 


INDEX 


443 


ganization  of,  101 ;  aid  given  to,  106, 
107;  profits  of,  122 

Fort  Madison  National  Bank,  establish- 
ment of,   51 

Fourth  Legislative  Assembly,  investigation 
of  Miners'   Bank  by,   21,   22,   23,   33 

Fowler,   C.  M.,  address  by,   367 

Fractional  currency,  limitations  on,  97,  98 

Frankford  (Pennsylvania),  building  asso- 
ciation at,  230 

Free  banking,  national,  143,  144 

Free  Banking  BUI,  introduction  of,  75; 
passage  of,   75 

Free  banking  law  of  1858,  history  of,  74- 
82;  unpopularity  of,  133;  repeal  of,  135 

Free  banking  plan,  protection  of  notes  in, 
94 

Free  banking  system,  adoption  of,   58,   127 

Fremont  (Nebraska),  joint  stock  land 
bank  at,  295 

Fremont  Joint  Stock  Land  Bank,  loans  by, 
in    Iowa,    295 

French  coins,  use  of,  in  Iowa,  60,  61 

Frontier  banking  in  Iowa,  description  of, 
45-69 

Furniture,  prices  of,   5 

Furs,  storage  of,   344 

Galena  (Illinois),  branch  of  Bank  of  Illi- 
nois at,   10 

Galena  Branch  of  Bank  of  Illinois,  money 
loaned  by,    386 

Gallaher,  Ruth  A.,  acknowledgment  to,  XII 

Gallatin,  Albert,  definition  of  banking  given 
by,   390 

Gatling,  William  J.,  appointment  of,  as 
bank  commissioner,  84;  election  of,  as 
secretary  of  the  Board  of  Directors,  99; 
presence  of,  at  meeting  of  bank  commis- 
sioners,  99 

Gear,  John  H.,  recommendation  of,  con- 
cerning private  banks,   165 

General  Assembly,  power  of,  concerning 
banks,  71,  72 ;  general  banking  law  en- 
acted by,   74,   75,  81 

General  banking  law  of  1858,  passage  of, 
74,  75;  vote  on,  75;  provisions  of, 
75-80;  opinions  concerning,  80-82;  re- 
peal of,    82 

Georgia,  money  from,   128 

"German",  elimination  of,  from  bank 
titles,   181 

German  Savings  Bank  of  Davenport,  in- 
corporation of,  136;  size  of,  160 

Germans,  attempt  of,  to  charter  new  banks, 
201 

Gifts,   distribution  of,   by  banks,   360 


Gillette,  E.  H.,  election  of,  to  Congress,  145 
Girls'  clubs,  promotion  of,  by  bankers,  346 
Gold,  increase  in,   after   1850,   6;   premium 

on,   123 
Goodrich,    Mr.,    application    of,    for    bank 

charter,   100 
Gower,     J.     H.,     Brothers     and     Company, 
early  bank  of,  51;  offer  of,  for  deposits, 
56 
Graham,    Thomas    A.,    appointment    of,    as 

bank    commissioner,    79 
Grain,  loans  on,  316;  prizes  for,  346 
Grant,   Judge,   arbitration  by,   69 
Graves,    J.   K.,    financial   assistance   offered 

by,   108 
Green,  J.,  application  of,  for  bank  charter, 

100 
Greenback  movement,   growth  of,   144,   145 
Greenback  party,   success  of,   145 
Greenbackers,  election  of,  to  Congress,  145 
Greenbacks,     redemption     of     State     Bank 
notes   in,    110,    111;    status   of,    as   legal 
tender,   113;   demand  for,   144 
Greene,   Joseph,   early  banking  business  of, 

51 
Greene,    Weare,    and    Benton,   bank   of,    53 
Greene,  Weare,  and  Rice,  early  bank  of,  52 
Greene  and  Stone,  bank  of,  49 ;  store  of,  51 
Greene    and    Weare,    branches   of,    52,    53 ; 
bank  of,    52,    62;    success   of,    68;    disso- 
lution of,    391 
Greenville,  robbery  of  bank  at,  376 
Greenwich      (England),     building     associa- 
tions  at,   229,   230 
Gresham's  law,  operation  of,  in  Iowa,   113 
Grimes,  James  W.,  revision  of  Constitution 
favored   by,    71;   message   of,    concerning 
banks,    74 
Grinnell,    J.    B.,    application    of,    for    bank 

charter,    100 
Grinnell,    application   from,    for    branch    of 
State    Bank,    100;    failure    of    First   Na- 
tional Bank  at,   178 
Griswold,    failure   of    First    National    Bank 

at,  178 
Group  organization  of  Iowa  Bankers  Asso- 
ciation,  371,   372;   officers  of,   372 
Guarantee    Mortgage    and    Finance    Com- 
pany  (Des  Moines),  mention  of,  422 
Guarantee  of  deposits    (see  Deposits,  guar- 
antee of) 

Hall,   J.   C,   Burlington  scrip  defended  by, 

66 
Hall     P.    W.,    election   of,    as    Secretary   of 

Iowa  Bankers  Association,  371 
Hamlin,  H.  J.,  address  by,  367 


444 


HISTORY    OF   BANKING    IN   IOWA 


Hammell,  Ralston,  and  Company,  applica- 
tion of,  for  branch  of  State  Bank,  100 

Haunan,  Chas.  R.,  oflSce  of,  in  Iowa  Bank- 
ers  Association,    370 

Hannibal  Journal,  comment  of,  concerning 
financial   conditions,    5 

"Hard  Money  Times",  5 

Harding,  "W.  P.  G.,  appearance  of,  before 
Iowa  Bankers  Association,  212,  366 

Harrison,  E.  H.,  appointment  of,  as  bank 
commissioner,  84 ;  presence  of,  at  meet- 
ing of  bank  commissioners,   99 

Hatch  Brothers,  advertisement  of,  64 

Hay,  price  of,  5 

Haymaker,  K.  V.,  loans  to  farmers  advo- 
cated  by,    252 

Hedge,  Thomas,  appointment  of,  as  bank 
commissioner,   79 

Hedrick,  D.  H.,  statement  by,  356 

Hefner,  George,  minority  report  offered  by, 
26,   27 

Heinsheimer,  D.  L.,  office  of,  in  Iowa 
Bankers    Association,    370 

Helsell,  F.  H.,  office  of,  in  Iowa  Bankers 
Association,   370 

Hempstead,  Stephen,  opposition  of,  to 
banks,    37,   38,    70,   71 

Henderson,  M.  V.,  Jr.,  appointment  of,  as 
Superintendent  of  Banking,  198;  par- 
ticipation  of,    in   conference,    216 

Henriques,  J.  E.,  office  of,  in  Iowa  Bank- 
ers Association,    363,    364 

Herron  Brothers,  early  bank  of,  50 

Hinsch,  C.  A.,  Federal  Reserve  Act  praised 
by,   211 

Hogan,  D.  P.,  bill  sponsored  by,  287,288; 
office  of,  in  Federal  Land  Bank  of 
Omaha,  293;  argument  of,   297 

Hogs,  prices  of,  5;  production  of,  320 

Homan's  Bankers  Almanac,  data  given  in, 
133 

Home  Building  and  Loan  Association  of 
Waterloo,  profits  paid  to  withdrawing 
members  of,   243;  loans  by,  246 

Home  loan  banks,  proposal  for,  264 

Home  owning,  advantages  of,  261 

Homes,  movement  for  better,   349 

Homestead   associations,   230 

Hooke,  F.  Howard,  opposition  of,  to  Fed- 
eral Reserve  Act,   209,   210 

Horses,   prices  of,    5 

Hosford,  A.  P.,  early  bank  of,  53 

Hubbard,  Mr.,  application  of,  for  bank 
charter,    100 

Hubbard,  Ackley,  office  of,  in  Iowa  Bank- 
ers Association,  370 


Hughes,  Thomas,  testimony  of,  in  legis- 
lative bribery  case,  26 

Hunt,  C.  W.,  position  of,  as  vice  president 
of  Iowa  Farm  Credit  Corporation,  317 

Hunt's  Merchants'  Magazine,  money  de- 
scribed in,   128 

Huxford,  E.  D.,  office  of,  in  Iowa  Bankers 
Association,    370 

Ida  County,  cattle  business  in,   324,   325 

Ida  County  Bankers  Association,  organiza- 
tion  of,   372 

Ida  Grove,  failure  of  First  National  Bank 
at,    177,    178 

Idaho,  law  of,  relative  to  private  banks, 
167 

Illinois,  free  banking  system  in,  58 ;  bank 
notes  of,  59,  60,  128;  banking  laws  of, 
81,  82;  State  bank  of,  83,  124,  400; 
number  of  banks  in,  168,  169;  number 
of  building  and  loan  associations  in, 
230;  value  of  farm  land  in,  269;  pur- 
chase of  mortgages  in,  283;  rate  of  in- 
terest in,  304;  production  of  corn  in, 
320;  production  of  hogs  in,  320;  sec- 
retary of  bankers  association  in,  369 ; 
banks  prohibited  by,   390 

Illinois  Bankers  Association,  joint  meet- 
ing with,   367 

Illinois  Joint  Stock  Land  Bank  (Monti- 
cello,   Illinois),   loans  by,    295 

Immigration,   increase   in,    45 

Income  Tax  Short  Course,  bankers  at,  346 

Income  taxes,  exemption  of  Federal  land 
bank  bonds  from,  292,  293;  increase  in, 
302 ;  assistance  of  banks  in  computa- 
tion  of,   346,   382 

Incorporations,  article  on,  73  (see  also 
Corporations) 

Incorporations,  Committee  on,  petition  re- 
ferred to,   35;  report  of,   36,   37,  42,   71 

Independent  Treasury,  establishment  of, 
127 

Indian  wars,  land  warrants  to  soldiers  of, 
54 

Indiana,  free  banking  law  of,  58;  bank 
notes  of,  59,  60,  128 ;  State  bank  in,  72, 
73,  83,  85,  105,  124,  125,  400;  policy 
of  banks  of,  112;  law  of,  relative  to  pri- 
vate banks,  167;  number  of  building 
and  loan  associations  in,  230;  farm 
loans  in,    251 

Industrial  Finance  Corporation,  organiza- 
tion of,  308;  attempt  of,  to  operate  in 
Iowa,   309;  stock  owned  by,  313 

Industry,  post  war  boom  in,  213 

Ingham,  S.  R.,  banking  interests  of,  64,  65 


INDEX 


445 


Ingwersen,  J.  H.,  Federal  reserve  system 
supported  by,  212;  office  of,  in  Iowa 
Bankers  Association,   370 

Institute  of   Banking,    work  of,    382 

Insurance,  promotion  of,  by  bankers,  345, 
346 ;  amount  of,  held  by  Iowa  Bankers 
Association,    379 

Insurance  companies,  purchase  of  mort- 
gages by,  282,  283,  284;  interest  on 
mortgages  held  by,  285,  303,  304 

Insurance  department  of  Iowa  Bankers 
Association,    378,    379 

Insurance  for  borrowers,  253,  254 

Insurance  for  Morris  Plan  companies,  308, 
309 

Interest,  rates  of,  91,  246,  247,  249,  250, 
251,  252,  284,  285,  291,  292,  303,  304, 
310,  330,  340;  payment  of,  on  deposits, 
335 

Internal  Revenue,  Commissioner  of,  re- 
ports from  private  banks  required  by, 
133 

Investment,  business  of  early  banks  in,  56 ; 
activities  of  banks  in  promoting,  341, 
342 

Investment  bankers,  use  of  name  of,  in 
title,   326;  list  of,  in  Iowa,  422 

Investment  banks,  creation  of,  for  farm 
mortgages,  267;  field  of,  325-329;  statis- 
tics of,  327,  328;  securities  handled  by, 
327,    328 

Investment  securities,  sale  of,  on  install- 
ment plan,  260 

Investment  service  of  banks,  341,  342 

Iowa,  early  settlements  in,  1 ;  population 
of,  1,  45,  353;  review  of  economic  con- 
ditions in,  1-9;  pioneer  conditions  in, 
2,  3;  agricultural  conditions  in,  3,  4; 
settlers  in,  4 ;  prices  in,  4,  5 ;  interest  of 
people  of,  in  banks,  7,  8,  35;  organiza- 
tion of  Territory  of,  19;  failure  of,  to 
pay  debt  to  Miners'  Bank,  31;  defeat  of 
Constitution  of  1844  in,  41;  boundaries 
of,  41;  admission  of,  44;  immigration 
to,  45 ;  frontier  banking  in,  45-69 ;  agri- 
cultural resources  of,  45,  46;  descrip- 
tion of  kinds  of  money  in,  58-61,  91; 
aid  of  State  Bank  to,  109,  110;  na- 
tional banks  in,  130-132,  149,  150; 
number  of  banks  in,  133,  168-175,  353, 
361;  banking  legislation  in,  135,  136, 
138-142;  laws  of,  concerning  savings 
banks,  138-142,  155,  156,  157,  158,  159, 
160;  amount  of  circulation  in,  144; 
type  of  savings  banks  in,  154;  restric- 
tion on  use  of  word  "bank"  in,  168; 
examination  of  banks  by,  192,  193,  194, 


195,  196;  placing  of,  in  seventh  Fed- 
eral reserve  district,  206;  credit  to 
banks  in,  215,  216,  217;  number  of 
building  and  loan  associations  in,  230, 
231,  232,  234;  bad  reputation  of 
national  building  and  loan  associa- 
tions of,  234,  235;  law  of,  relative 
to  fines,  247 ;  supervision  of,  over 
building  and  loan  associations,  256-260; 
value  of  farm  land  in,  268-270;  rank  of, 
in  per  capita  wealth,  270,  351:!;  farm 
mortgages  in,  270-274,  283;  placing  of, 
in  eighth  Federal  farm  loan  district, 
289;  number  of  farm  loan  associations 
in,  294;  taxation  of  mortgaged  prop- 
erty by,  302;  interest  rates  in,  303,  304; 
production  of  corn  in,  320;  cattle  in, 
320;  cattle  loans  in,  321,  323,  324;  in- 
vestment banks  in,  325-329;  debt  of ,  326; 
attitude  of,  toward  postal  savings  banks, 
330;  loans  in,  339,  340;  number  of 
municipalities  in,  354;  profits  of  banks 
in,  356-359;  debt  of,  to  Miners'  Bank, 
388;  prohibition  of  banks  in,  390;  ques- 
tion of  deposit  insurance  in,  424 
Iowa,  Territory  of,  establishment  of,  36 
Iowa      Agricultural      Experiment      Station, 

survey  by,  269 
Iowa  Bankers  Association,  first  President 
of,  55 ;  attitude  in,  concerning  regulation 
of  private  banking,  165,  166,  167;  list 
published  by,  168,  169;  resolution  by, 
concerning  reports  from  banks,  187; 
banking  department  supported  by,  197; 
opposition  of,  to  new  enterprises  during 
war,  200,  201 ;  blue  sky  bills  supported 
by,  202;  attitude  of.  toward  Federal  re- 
serve system,  206,  209,  210,  211,  212; 
farmer-banker  conferences  held  by,  212, 
216;  investigation  by,  of  clearing  meth- 
ods, 221;  farm  credit  corporations  spon- 
sored by,  314;  attitude  of,  toward  trade 
acceptances,  339;  interest  of,  in  invest- 
ments, 342 ;  farm  accounting  promoted 
by,  345;  prize  offered  by,  346;  income 
tax  conference  sponsored  by,  346,  382; 
interest  of,  in  schools,  348 ;  sale  of  bonds 
promoted  by,  349 ;  resolution  for  pre- 
paredness adopted  by,  350;  history  of, 
362-382;  organization  of,  362;  constitu- 
tion of,  362,  363;  officers  of,  362,  363, 
364,   368-370,   371;   membership  in,   362, 

363,  364,  365,  366,  368,  382;  growth 
of,  363-366;  programs  of,  363,  364,  365, 
366;     attendance    at    meetings    of,    363, 

364,  365,  366,  427;  presence  of  women 
at,     366;-  social    features    of,     366-368; 


446 


HISTORY    OF    BANKING    IN    IOWA 


contribution  of,  toward  entertainment, 
367;  joint  meetings  of,  367,  368;  list  of 
presidents  of,  370;  places  of  meetings  of, 
370;  group  organization  of,  371,  372; 
county  associations  in,  372,  373;  rela- 
tions of,  with  American  Bankers  Asso- 
ciation, 373,  374;  jirotective  service  of, 
374-377;  activities  of,  on  behalf  of  mem- 
bers, 374-382 ;  time  lock  expert  employed 
by,  378;  insurance  department  of,  378, 
379;  legislative  committee  of,  380,  381; 
legal  department  of,  381,  382;  activities 
of,  for  general  welfare,  382 ;  growth  of, 
382 ;  opposition  of,  to  guarantee  of  de- 
posits.  424 

"Iowa  boys'  corn  contest",  prize  in,  346 

Iowa  Building  and  Loan  League,  address 
to,  252;  plan  presented  to,  253;  organi- 
zation of,    263 

Iowa  Capital  Reporter,  opposition  of,  to 
banks,  8,  43 ;  charges  of  bribery  made 
by,  25,  26;  editors  of,  26,  27;  charges 
of,  against  Miners'  Bank,  30 

Iowa  City,  paper  published  at,  3 ;  pay  of 
workmen  at,  5 ;  opposition  to  proposed 
bank  at,  8 ;  attempt  to  establish  bank  at, 
35 ;  constitutional  convention  at,  36,  42, 
71;  Democratic  convention  at,  47; 
branch  bank  of  Cook  and  Sargent  at,  50 ; 
early  banks  at,  51,  52;  exchange  busi- 
ness of  bankers  at,  56;  offer  of  banks 
in,  for  deposits,  56;  bank  notes  circu- 
lated in,  63;  scrip  of,  65,  66;  head  office 
of  State  Bank  at,  85,  99;  branch  of 
State  Bank  at,  85,  100,  101,  397;  meet- 
ing of  bank  commissioners  at,  99 ;  meet- 
ing at,  of  Board  of  Directors  of  State 
Bank,  102,  117,  123;  establishment  of 
First  National  Bank  at,  131 ;  activities  of 
First  National  Bank  at,  132;  clearing 
house  association  in,  175,  176;  interest 
rate  of  building  and  loan  association  at, 
250;    cost  of   improvements   at,    388 

Iowa  City  Branch  of  State  Bank,  organiza- 
tion of,  101;  representative  of,  102;  ar- 
rival of  first  notes  at,  104,  105;  United 
States  bonds  sold  by,  109;  conversion  of, 
into  national  bank,  118;  profits  of,  122; 
premium  allowed  by,  for  gold  deposit, 
123 

Iowa  City  National  Bank,  organization  of, 
118 

Iowa  Corn  and  Small  Grain  Growers  Asso- 
ciation,  exhibit  of,   347 

Iowa  Farm  Bureau  Federation,  farm  credit 
corporations  endorsed  by,   314 

Iowa    Farm    Credit    Corporation,    organiza- 


tion of,  316;  capital  of,  316;  stock  of, 
316;  control  of,  316,  317;  officers  of, 
316,   317 

Iowa  Farm  Mortgage  Association,  data  se- 
cured by,  270;  organization  of,  280; 
members  of,  281;  meeting  of,  285;  dis- 
cussion before,  296;  resolution  of,  on 
tax  exemption,  298,  299;  joint  meeting 
with,    368 

Iowa  Investment  Corporation  (Waterloo), 
mention  of,  422 

Iowa  Joint  Stock  Land  Bank  of  Sionz 
City,  charter  to,  295;  plan  of  organiza- 
tion of,   298 

Iowa  Loan  and  Trust  Company  of  Des 
Moines,   business  of,   279 

Iowa  Standard,  The,  description  of  agricnl- 
tural  conditions  printed  in,  3,  4,  5; 
financial  difficulties  of,  4;  attitude  of, 
concerning  banks,  7,  8;  party  prejudice 
of,  8 ;  attitude  of,  in  bribery  incident, 
27;   comment  in,  on  Constitution,  43,  44 

Iowa  State  College  of  Agriculture  and  Me- 
chanic Arts,  record  books  furnished  by, 
345 ;  corn  growing  contest  promoted  by, 
346 

Iowa  State  National  Bank  of  Sioux  City, 
president  of,   54 

Iowa  Sun,  extract  from,  4 

Isett  and  Brewster,  early  bank  of,  51 

Jackson,  Andrew,  opposition  of,  to  United 
States  Bank,   1,  7 

Jackson  County,  memorial  circulated  in, 
concerning  Miners'  Bank,  27,  28;  at- 
tempt to  establish  bank  in,  35 

Jackson  County  Bank  (Michigan),  notes 
of,  16,  18 

Jayne,  Henry,  rural  credit  bill  opposed  by, 
287,288 

Jesup,  F.  S.,  and  Company,  early  bank  of, 
50 

Jesup  and  Stimson,   early  bank  of,   50 

Jewelry,   storage   of,    343 

Johnson  County,   address  to  electors  of,  44 

Joint  stock  land  banks,  interest  rates  of, 
292 ;  relation  of,  to  Federal  farm  loan 
system,  294;  account  of,  294-298; 
loans  made  by,  294-303;  formation  of, 
294,  295;  capital  of,  294,  295,  296, 
297;  bonds  issued  by,  295;  list  of,  in 
Iowa,  295;  business  of,  295,  296;  de- 
fects in  law  for,  296,  297,  301;  tax  ex- 
emption features  of,  297,  298.  300,  301, 
302,    303 

Joliet,  coming  of,  to  Iowa,  1 


INDEX 


447 


Ealida  Venture  (Ohio),  quotation  from, 
concerning  banks,   8 

Kansas,  law  of,  relative  to  private  banks, 
167;  farm  loans  in,  251;  debenture  com- 
panies in,  278;  losses  of  farmers  in,  286 

Kansas  City  (Missouri),  cattle  business  at, 
320,   321 

Kentucky,  bank  notes  of,  59,  60,  128; 
policy  of  banks  of,  112 

Keokuk,  early  bank  in,  49,  51;  applica- 
tion from,  for  branch  of  State  Bank, 
100;  branch  of  State  Bank  at,  101,  397; 
incorporation  of  bank  at,  136;  failure  of 
First   National  Bank  at.    178 

Keokuk  Branch  of  State  Bank,  organiza- 
tion of,  101;  representative  of,  102; 
charges  against.  111;  conversion  of,  into 
national  bank,  118;  profits  of,  122;  ref- 
erence to,   397 

Keokuk  Loan  and  Building  Association,  or- 
ganization  of,    231 

Keokiik  Savings  Bank,  incorporation  of, 
136 

Kinley.  David,  investigation  by,  337 

Kirkwood,  S.  J.,  opinion  of,  concerning 
banking  law,  80,  81,  82;  amendments  to 
banking  law  vetoed  by,  81;  influence  of, 
in  organization  of  State  Bank,  86;  ap- 
plication by,  for  bank  charter,  100; 
presence  of,  at  meeting  of  Board  of  Di- 
rectors, 102;  election  of,  as  president  pro 
tem  of  State  Bank,  102;  aid  of  State 
Bank  to,  during  Civil  War,  108;  finan- 
cial assistance  of,  to  State,  108;  recom- 
mendation of,  concerning  State  Bank 
notes,  113;  State  Bank  notes  burned  by, 
116;  service  of,  in  closing  of  State  Bank, 
117 

Knapp  and  Eaton,   early  bank  of,   51 

Knorpp  Cattle  Loan  Company  (Kansas 
City),  business  of,   321 

Knox,    Comptroller,   reports  of,   144 

Labor,   United   States   Commissioner  of,  re- 
port   of,    on    building   and   loan    associa- 
tions,  231,   233,   234,   240,   245 
Labor,    United    States    Department    of,    re- 
port   of,    on    building    and   loan    associa- 
tions,   230;    home   bureau   sponsored   by, 
264 
Lafayette   (Indiana),  bank  at,  105 
Lake,  Benjamin,  appointment  of,  on  Board 
of    Directors    of    State    Bank,    86;    pres- 
ence  of,    at  meeting  of   Board  of  Direc- 
tors,   102 
Lake   Michigan,    "wild   cat"   bank  near,   59 
Land,  difficulties  in  purchase  of,   3 ;   specie 


payments  required  for,  6 ;  sale  of,  54, 
55;  speculation  in,  54,  55,  68;  price  of, 
213,  268-270;  pioneer  loans  on,  267; 
purchase  of,    347    (see   also  Real   estate) 

Land  warrants,  use  of,  by  bankers,  54,  55, 
284 

Langworthy,  Mr.,  application  of,  for  bank 
charter,    100 

Langworthy   Brothers,    bank  of,   49,    50 

Large,  John  J.,  office  of,  in  Iowa  Bankers 
Association,    370 

Larrabee,  William,  advice  of,  to  bankers, 
351 

Law  Guarantee  and  Trust  Society,  Lim- 
ited, organization  of,   279 

Leach,  S.  M.,  office  of,  in  Iowa  Bankers 
Association,   370 

Lead  mines  at  Dubuque,   10 

Leavitt,    John   H.,    early   bank   of,    53 

Leavitt  and  Johnson  National  Bank  (Wa- 
terloo),   establishment  of,   53 

Le  Claire,  Antoine,  picture  of,  on  bank 
notes,  98;  application  of,  for  bank  char- 
ter,   100 

Lefifler,  Shepherd,  letter  to,  concerning 
Miners'    Bank,    26 

Legal  clerk,  employment  of,  in  Banking 
Department,    199 

Legal  department  of  Iowa  Bankers  Asso- 
ciation,   381,    382 

Legal  tender,  foreign  coins  not  included 
in,  6 ;  Treasury  notes  given  value  of, 
110;  State  Bank  notes  accepted  as,  113 

Legislation,  interest  of  Iowa  Bankers  As- 
sociation  in,    380 

Legislative  Assembly  of  Iowa,  investiga- 
tions of  Miners'  Bank  by,  19-29;  repeal 
of  charter  of  Miners'  Bank  by,  30-34 

Legislative  committee  of  Iowa  Bankers  As- 
sociation, work  of,  380,   381 

Legislature,  special  corporation  charters 
not  to  be  granted  by,  47,  48  (see  also 
General  Assembly  and  Legislative  Assem- 
bly) 

Le  Mars  National  Bank,  failure  of,  178 

Lewis,  Walter,  affidavit  by,  concerning 
Miners'   Bank,   386 

Liabilities,   reports   concerning,   185 

Liberty  bonds,  purchase  of,  213,  312;  sale 
of,  331,   349,  350;  storage  of,  344 

Life  insurance  companies,  farm  mort- 
gages purchased  by,  273,  274  (see  also 
Insurance  companies) 

Lincoln,  Abraham,  national  currency  ap- 
proved by,  129 

Lincoln  (Nebraska),  joint  stock  land  bank 
at,  295 


448 


HISTORY    OF    BANKING    IN    IOWA 


Lincoln  Joint  Stock  Land  Bank,  loans  by, 
295 

Liquidation,   213,    216 

Live  stock,  prices  of,  5 ;  promotion  of,  by 
bankers,    346,    347 

Live  Stock  National  Bank  of  Siotix  City, 
loan    company   associated   with,    321 

Lloyd,  O.  G.,  report  of,  on  Iowa  land 
values,   269 

Loan  and  trust  companies,  banking  activi- 
ties of,  160;  supervision  of  Auditor  of 
State  over,  160;  number  of,  in  Iowa, 
160,  171;  development  of,  160-163; 
trust  funds  of,  161;  regulations  of,  161, 
162;  powers  of,  161,  162,  163;  capital 
of,  174;  interest  paid  by,  335;  dividends 
of,  357,  358 

Loan  shark  methods,   305 

Loans,  limitations  on,  91,  92,  93,  152,  159; 
amount  of,  174,  214,  215;  plan  of,  by 
building  and  loan  associations,  244-247; 
security  of,  245 ;  repayment  of,  to  build- 
ing and  loan  associations,  247-251;  rules 
of.  291,  293;  ways  of  making,  339,  340; 
rates  of  interest  on,  340 

Lobdell,  Charles  E.,  decision  explained  by, 
298 

Local  building  and  loan  associations,  field 
of,   233,   234;    number  of,   234 

Lockwood,  E.,  counting  room  of,  13 

Loco-foco,   origin  of  name  of,    385 

Loco-foco  paper,  quotation  from,  8 

Locomotive,   first,  in  Iowa,  46 

Logansport  (Indiana),  bank  at,  105 

Long.  Frank  J.,  meeting  called  by,  280 

Los  Angeles  (California),  meeting  of  bank- 
ers at,  365 

Losses  of  building  and  loan  associations, 
240,   241 

Louisiana,  building  and  loan  associations 
in,  230 

Lowe,  Ralph  P.,  bank  law  proclaimed  by, 
75,  84 ;  opinion  of,  concerning  banking 
law,  80,  81;  picture  of,  on  bank  notes, 
98 ;  recommendation  of,  concerning 
State  Bank,    109,   110,   112,   113 

Loyer,  J.  W.,  employment  of,  as  time  lock 
expert,   377,  378;  fees  of,  378 

Lucas,  Robert,  messages  of,  concerning 
State  government,  36;  political  experi- 
ence of,  in  Ohio,  85,  86;  picture  of,  on 
bank  notes,  98 

Lucas,  W.  v.,  recommendation  of,  concern- 
ing private  banks,  165 

Lyons,  early  bank  of,  51;  First  National 
Bank     of,     51 ;      application     from,     for 


branch     of    State    Bank,     99     (see    also 

Lyons  City) 
Lyons  City,  branch  of  State  Bank  at,  101; 

establishment  of  national  bank  at,   131 
Lyons   City  Branch  of   State  Bank,   organi- 

z.Ttion   of.    101;    suit  against,   concerning 

redemption  of  notes,  111;  profits  of,  122 

McCarthy,    C.   C,   recommendation  of,    con- 
cerning examinations  of  banks,   196 
McCord,  J.   H.,  office  of,   in  Iowa  Bankers 

Association,    370 
McDougal,     J.     B.,     membership    of     State 
banks    in    Federal   reserve   system    urged 
by.   211.   212 
McFarlane,   Hutton,   and  Patrick,  company 

organized    by,    278 
McGregor,   branch  of   State  Bank  at,   101; 
application    from,    for    branch    of    State 
Bank,    105,    106 
McGregor    Branch   of    State   Bank,    organi- 
zation of.   101;  profits  of,  122 
McHenry,   W.    A.,    part   of,    in   organization 
of    Iowa    Bankers    Association,    362;    of- 
fice of,  in  Iowa  Bankers  Association,  370 
McHugh,  John,  office  of,  in  Iowa  Bankers 

Association,    370 
McKee.  D.  H.,  address  by,  278,  279;  meet- 
ing   called    by,    280;    office    of,    in    Iowa 
Bankers   Association,    370 
Macklot,  Mr.,  application  of,  for  bank  char- 
ter,  100 
Macklot,  Corbin,  and  White,  early  bank  of. 

52 
Macklot  and   Corbin,   early  bank  of,   50 
McNett.  Wm.,  address  by,  352,  353 
McNider,  C.  H.,  office  of,  in  Iowa  Bankers 

Association,    370 
Maine,    currency  from,    128 
Managers,  farms  operated  by,  272,  273 
Manning,   Calvin,   address  by,   352 
Manufacturing,  increase  of,  in  Iowa,  46 
Maquoketa    Branch    of    State    Bank,    101 : 

profits   of,    122 
"Marble  Bank"   building,   use  of,  by  First 

National  Bank  of  Davenport,   130 
Marion,    circulation  of  bank  notes  at,   64 
Marquette,  coming  of,  to  Iowa,   1 
Mar.shalltown,  meeting  of  bankers   at,   370 
Martin.  Charles  H.,  office  of,  in  Iowa  Bank- 
ers Association,   370 
Maryland,  bank  notes  of,  59,  60 
Mason   City,   clearing  house  association  in, 
175;   investment  company  at,   326,   422; 
meeting  of  bankers  at,  370 
Masonic   Temple    (Davenport),    use   of,    for 
meetings,  366 


INDEX 


449 


Massachusetts,  banking  laws  in,  38,  88; 
building  and  loan  associations  in,  230; 
law  of,  relative  to  fines,  247 

Mather,  Thomas,  Miners'  Bank  owned  by, 
24 

Membership  in  Iowa  Bankers  Association, 
kinds  of,  368;  fees  for,  368 

Merchandise,  bill  relating  to  bulk  sales  of, 
380 

Merchants  Branch  of  State  Bank  (Daven- 
port), charter  of,  101;  representative  of, 
102;  conversion  of,  into  national  bank, 
118 

Merchants  Insurance  Company  (Burling- 
ton), incorporation  of,  136;  records  of, 
402 

Merrick,  H.  S.,  meeting  called  by,  280 

Merrill,  Samuel,  recommendation  of,  con- 
cerning savings  banks,   138 

Messenger,  George  H.,  report  made  by. 
190;  appointment  of,  as  Superintendent 
of  Banking,  198;  charter  refused  by, 
201 

Mexican   dollars,  use  of,  in  Iowa,  61 

Mexican  War,  land  warrants  to  soldiers  of, 
54,   284 

Meyer,    Henry,   banker   described   by,    351 

Michigan,  money  of,  6,  7,  128;  condition 
of  banks  in,  16,  17,  18,  189;  experi- 
ment of,   with   State  bank,   83 

Michigan  bank  commissioners,  report  of, 
16,    189 

Midland  Mortgage  Company  of  Cedar  Rap- 
ids, success  of,  419 

Military   service   of   Iowa   bankers,    350 

Miller,    Edmund,    early   bank   of.    53 

Miller,  Homer  A.,  office  of,  in  Iowa  Bank- 
ers  Association,    370 

Miller,  Samuel  F.,  presence  of,  at  meeting 
of  Board  of  Directors,  102;  financial 
assistance  of,   108 

Mills,  C.  B.,  office  of,  in  Iowa  Bankers 
Association,    370 

Miners'  Bank  of  Dubuque,  assets  of,  6; 
granting  of  charter  for,  10;  articles  of 
incorporation  of,  10,  11;  restrictions  on, 
10,  11,  12,  13;  capital  of,  10,  12,  13, 
14,  16;  establishment  of,  10-13;  history 
of,  10-34;  management  of,  11;  officers 
of,  11,  12,  13,  14;  opening  of,  13,  14; 
notes  of,  13,  386;  investigation  of,  by 
Wisconsin  legislative  committee,  14-19; 
second  legislative  investigation  of,  15-19; 
report  concerning,  17,  20,  23,  24;  specie 
problems  of,  17,  18,  19,  20,  22,  23,  24, 
29,  30;  financial  statements  of,  17,  18, 
19,    20,   21,    22,   23;    investigation   of,   by 


First  Legislative  Assembly  of  Iowa,  19, 
20;  investigation  of,  by  Fourth  Legisla- 
tive Assembly,  21,  22,  23;  change  of 
ownership  of,  23,  24;  opinions  of,  23, 
24,  25;  investigation  of,  by  Fifth  Legis- 
lative Assembly,  24-27;  attempt  to  repeal 
charter  of.  24-27,  50;  petitions  concern- 
ing, 27,  28;  opposition  to,  in  Sixth  Leg- 
islative Assembly,  27-29;  attempts  to  re- 
peal charter  of,  28,  29,  30-34,  386,  387; 
charges  against,  30 ;  failure  of  Iowa  Ter- 
ritory to  pay  debt  to,  31,  388;  decision 
of  courts  concerning  repeal  of  charter  of, 
32;  closing  of,  32;  resume  of  history  of, 
32-35 ;  party  alignment  in  opposition  to, 
33,   34,   124;   purpose  of,   126 

Minnesota,  rejection  of  bank  notes  of,  112; 
bad  reputation  of  national  building  and 
loan  associations  of,  234,  235 ;  debenture 
company  in,  279;  secretary  of  bankers 
association  in,  369;  prohibition  of  banks 
in,    390 

Mississippi,  law  of,  relative  to  private 
banks,   167 

Mississippi  River,  early  banks  in  towns  on, 
49-51 

Missouri,  bank  notes  of,  59,  60,  128;  ex- 
periment of,  with  State  bank,  83;  law 
of,  relative  to  private  banks,  167;  sale 
of  farm  mortgages  of,  282;  secretary  of 
bankers  association  in,  369;  organisa- 
tion of  bankers  in,   371 

Missouri  River,  early  private  banks  in 
towns   on,    53,    54 

Mobley,  M..  testimony  of,  concerning  Min- 
ers' bank,  24 ;  censure  of,  in  bribery 
case,  26;  appointment  of,  as  cashier  of 
Miners'  Bank.  30;  early  bank  of,   50 

Moline    (Illinois),    tour   of,    367 

Money,  scarcity  of,  2,  4 ;  kinds  of,  4,  6.  7 ; 
substitutes  for.  61-69;  need  of  uniform- 
ity of,   127,  128 

Moneys  and  credits,  taxation  of,  265,  302, 
303 

Montana,  cattle  loans  in,   321,   325 

Monticello  (Illinois),  joint  stock  land  bauk 
at,   295 

Morgan,  James  M.,  exoneration  of,  in  brib- 
ery case,   26 

Morgan,    Pierpont,   reference  to,    50 

Mormons,  settlement  of,  near  Council 
Bluffs,   53 

Morris,  Arthur  J.,  company  organized  by, 
307 

Morris  Plan  companies,  purpose  of,  306, 
307,  318;.  organization  of,  307;  list  of, 
in  Iowa,   307,   308;    association  of,   308; 


29 


450 


HISTORY    OF    BANKING    IX    IOWA 


insurance  department  in,  308,  309 ; 
loans  by,  309,  310,  311,  312;  interest 
rates  of,  310;  reasons  for  borrowing 
from,  311,  312;  losses  of,  312,  313; 
ownership  of,  313;  dividends  of,  313; 
management  of,  313;  lowii  laws  relat- 
ing to,  313,  314;  taxation  of.  313,  314; 
comi>etitors  of,  314 
Morris    Plan    company   at    WasUiugton,    D. 

C.  losses  of,  312 
Morris    Plan    Insurance    Society,    organiza- 
tion of,   308 
Mortgage    and    Debenture    Company,    Lim- 
ited, organization  of,  279 
Mortgage  bankers,  opposition  of,  to  Federal 
farm  loan  system,  298;  opposition  of,  to 
tax  exemption,   299 
Mortgage  banking,  early  history  of,  274-276 
Mortgaged  farms,  statistics  of,   271,  272 
Mortgages,    foreclosure   of,    240,    247,    248. 
286,   287;   on  farms,   270-274;    value  of, 
273,    274;    interest    rates   on,    284,    285, 
303,   304;    giving  of,   as   collateral,   292; 
sale  of,   297;  taxation  of,   302;   value  of, 
to  tenants,  347 
Mount     Pleasant,      application     from,      for 
branch    of    State    Bank,    100;    branch    of 
State  Bank  at,   101.   ;!97;   population  of, 
397 
Mt.  Pleasant  Branch  of  State  Bank,  organ- 
ization  of,    101;    representative  of.    102; 
investigation  of,  107;  profits  of,  122 
Mullally,   P.,  addre.'is  by,  352 
Municipalities,    debts   of,   326;    numbers   of, 

in  Iowa,  354 
Murray,   W.   J.,   appointment   of.   as   Super- 
intendent   of   Banking,    198 
Muscatine,  early  bank  in,   49,   51;   applica- 
tion   from,    for    branch    of    State    Bank, 
100;  branch  of  State  Bank  at,  101,  397; 
clearing   house   association    in,    175,    176 
Muscatine   Branch   of    State   Bank,   organi- 
zation   of.    101;    representative   of,    102; 
reorganization    of.    106;    charge    against, 
111;  profits  of,   122 
Muscatine    County,    address   to    electors   of, 

44 
Mutual  Home  Association  of  Dayton,  Ohio, 

plan   of,    238,    239 
Mutual  savings  bank,   plan  of  organization 

of,   154 
Myers.    J.   K.,  killing   of,    376;    income  for 
widow   of,    376 

Nash,   Ohio   State   Senator,   speech  by,   con- 
cerning banks,   7 


National  and  State  Bankers  Protective  As- 
sociation,   conference   held  by,    221 

National  Association  of  Morris  Plan  Bank- 
ers, organization  of,  308 

National  bank  notes,  status  of,  as  legal 
tender,  113 

National  Banking  Act,  effects  of,  82,  114, 
115,  135;  adoption  of.  114,  115,  129; 
amendments  to,  143,  148 

National  banking  system,  origin  of,  127- 
130    (see  also  National  banks) 

National  banks,  establishment  of,  50,  114, 
115,  130-132;  conversion  of  State  Bank 
branches  into,  118;  notes  of,  126,  145 
146,  148,  154,  336;  origin  of  system  of 
127-130;  capital  of,  129,  134,  146,  149 
150,  155,  156,  174,  427;  powers  of,  129 

130,  223-225;   deposit  of  bonds  by,  130 
protection  afforded   by,    131;   number  of 

131,  146,   148,    149,    150,   153,   164,    170 
171,    204;    disadvantages    of,    134,    144 
development    of,    in    Iowa,    143-150;    ap 
jjortionment  of  notes  of,   143,   144;   pres 
tige  of,    146;    comparison  of,   with   State 
banks,    146,    147;    assets    of,    146,    147, 
149,    150,    427;    deposits    in,    149,    150, 
334,    335;    use  of  word    "State"    in   title 
of,     150,     151;     relation    of    trust    com- 
panies to,   163,   224,   225;   statistics  con- 
cerning, 172,  215;  failures  of,  177,  178 
size    of,    181;    reports    from,    183,    184 
187;  examination  of,   190,  191,  192;  ob 
ligation   of,   to   .join   Federal   reserve   sys 
tem,    207;    redi.scounts    of,    215;    reserve 
requirements   of,    217;    loans  on   real   es- 
tate   permitted    to,    223,    224,    276,    305; 
interest  paid  by,   335;   earnings  of,   357, 
358,    359 

National  building  and  loan  associations,  sta- 
tistics of,   233,   234 

National  currency  associations,  power  of, 
to  issue  currency,  205;  formation  of.  227 

National  farm  mortgage  association,  organ- 
ization of,   281 

National  Monetary  Commission,  report  of, 
160,  168,  174.  177,  205;  creation  of, 
205;    investigation  by,   337 

National  State  Bank  of  Burlington,  claim 
of.  to  being  oldest  Iowa  bank,  49,  50 ; 
organization  of,   118 

National  State  Bank  of  Des  Moines,  organi- 
zation  of,    118 

National  Surety  Company  of  New  York,  in- 
surance contract   with,    378,   379 

Nebraska,  attitude  of.  toward  banks,  61, 
62,  64;  bank  notes  of,  61-64,  128;  law 
of,     prohibiting     national     building     and 


INDEX 


451 


loan  associations,  234,  235;  farm  loans 
in,  251;  debenture  companies  in,  278; 
losses  of  farmers  in,  286;  placing  of,  in 
eighth  Federal  farm  loan  district,  289; 
cattle  loans  in,  321,  325 

Nebraska,  Bank  of,  incorporation  of,  62 ; 
circulation  of  notes  of,  63,  64;  value  of 
notes  of,   64 

Nebraska  City   (Nebraska),  bank  at,  62 

Nebraska-Iowa  bank  notes,  account  of, 
61-64 

Negotiable  note,  decision  relative  to,  381 

Nemaha  Valley   Bank,   incorporation   of,   62 

Nevada,  per  capita  wealth  of,  270 

New  England,  bank  notes  of,  59,  128  ;  mu- 
tual savings  banks  in,  154;  sale  of 
mortgages  in,   283 

New  Hampshire,  sale  of  mortgages  in,  283 

New  Jersey,  law  of,  relative  to  private 
banks,  167;  number  of  building  and 
loan  associations  in,  230 

New  York,  bank  notes  of,  59,  60,  128; 
stocks  to  be  sold  at,  77;  banking  laws  of, 
88,  127,  167;  clearing  system  in  banks 
of,  219;  number  of  building  and  loan 
associations  in.  230;  Morris  Plan  Insur- 
ance Society  in,  308;  organization  of 
bankers   in,    371 

New  York  Clearing  House,  report  of,  con- 
cerning national  banks,  131,  132 

Newbold,  J.  G.,  recommendation  of,  con- 
cerning private  banks,   165 

Newspapers,  financial  difficulties  of,  4; 
bank  advertisements  in.  360 

Newton,  early  bank  of,   52 

Noble,  Mr.,  application  of,  for  bank  char- 
ter, 100 

Nollen,  H.  S.,  statement  by,  concerning 
mortgages,   283 

Nollen,  John,  reminiscences  of  early  bank- 
ing given  by,  362 

Norfolk  (Virginia).  Morris  Plan  company 
organized  at,  307 

North    Carolina,   money   from,    128 

North  Dakota,  prohibition  of  private  banks 
in,  167,  168;  debenture  companies  in, 
278;   losses  of  farmers  in,  286 

North   Liberty,   banks  in.    354 

North  west prn  Banker,  The,  discussion  in, 
287,   299 

Northwestern  Mutual  Life  Insurance  Com- 
pany of  Milwaukee,  loans  by,  285;  fore- 
closures on  mortgages  held  by,   286 

Note  holders,  protection  of,  183,   336 

Note  issue,  provision  concerning,  in  case 
of  State  Bank,  94-99;  monopolization  of, 
by    national    bajiks,    126;    regulation    of, 


134;    importance    of,    135;    profits    from, 

145 
Notes,  collection  of,  by  banks,   56 
Notes  and  references,   385-430 

Oats,  production  of,   in  Iowa,   46 

O'Brien,  Michael,  opposition  of,  to  banks, 
37 

Officer  and  Pusey,  bank  of,   53 

Ohio,  bank  notes  of,  59,  60;  State  bank  in, 
72,  83,  85,  124,  400;  influence  of,  on 
Iowa,  85,  86;  banking  laws  of,  94;  pol- 
icy of  banks  of,  112;  number  of  build- 
ing and  loan  associations  in,  230;  law 
of,  relative  to  fines,  247;  farm  loans  in, 
251,  252;  organization  of  bankers  in, 
371 

Ohio  Life  Insurance  and  Trust  Company, 
failure  of,   68 

Omaha  (Nebraska),  branch  of  Greene  and 
Weare  bank  at,  52 ;  success  of  building 
and  loan  associations  at,  251,  254;  Fed- 
eral land  bank  at,  289 ;  joint  stock  land 
bank   at,    295 

Oregon,  law  of,  relative  to  private  banks, 
167;  prohibition  of  banks  in,   390 

Osage,  circulation  of  bank  notes  at,  64 ; 
clearing  house  association  in,   175,  176 

Osborne,   Mayor,   address  by,   351 

Osceola,  failure  of  First  National  Bank  at, 
178,    179 

Oskaloosa  application  from,  for  branch  of 
State  Bank,  99.  100;  branch  of  State 
Bank  at,    101,    397 

Oskaloosa  Branch  of  State  Bank,  organiza- 
tion of,  101;  representative  of,  102; 
charge  against.   111;  profits  of,   122 

Otto.    Helen,    acknowledgment   to,    Xll 

Ottumwa,  meeting  of  bankers  at,   370 

Overdrafts,   prevalence  of,  in  Iowa,   361 

Ownei-s,  farms  operated  by,   271,  272,   273 

Ownership   of  banks,    355,    356 

Oxford  Provident  Building  Association 
(Philadelphia,  Pennsylvania),  organiza- 
tion of,  230 

Pacific  City,  application  from,  for  branch  of 
State  Bank,  100 

Palmyra    (Illinois),  branch  bank  at,  400 

Panama   Exposition,  trip  to,  346 

Panic  of  1837,  effects  of,  2 

Panic  of  1857,  effects  of,   68,  69,  275,  286 

Panic  of  1873,  effects  of,  on  amount  of  cir- 
culation, 144 

Panic  of  1907,  effects  of,  176,  181,  204, 
329 

Paper  money,   doubtful  value  of,   6,   7 ;    ef- 


452 


HISTORY  OF  BANKING  IN  IOWA 


feets  of,    70,    71;    issue  of,    74    (see  also 
Bank  notes  and  Greenbacks) 

Papers,   storage  of,   343 

Parker,  George  S.,  office  of,  in  Iowa  Bank- 
ers Association,  370 

Parsons,  Charles,  early  bank  operated  by, 
49.   51 

Patterson,  William,  letter  to,  concerning 
Miners'    Bank,    26 

Pawn  brokers,  activities  of,   306,  307 

Pearson,  Mr.,  appointment  of,  as  cashier 
of  Miners'  Bank,   23 

Peasley,  Francis  J.  C,  early  banking  busi- 
ness of,  49 ;  commission  business  of,  49, 
50 

Pella,  early  bank  at,  51 ;  failure  of  First 
National    Bank   at,    178 

Pennsylvania,  bank  notes  of,  59,  128;  num- 
ber of  building  and  loan  associations  in, 
230;  law  of,  relative  to  fines,  247;  or- 
ganization of  bankers  in,  371 

Permanent  plan  of  issuing  shares,  237, 
238,   239 

Perpetual  Building  and  Loan  Association 
of  Waterloo,  profits  paid  to  withdrawing 
members  of.   243 ;   loans  by,   246 

Perpetual  Building  Association  of  Clinton, 
organization  of,  231 

Perpetual  Savings  and  Loan  Association  of 
Cedar  Rapids,  organization  of,  231 ;  dis- 
tribution of  profits  of,  240;  withdrawal 
of  members  from,  242,  243 ;  loans  made 
by,   246 

Personal  credits  act,  opposition  of  bankers 
to,   381 

Personal  property,  taxation  of,  302,  303 

Peters  Joint  Stock  Land  Bank  (Omaha), 
charter  to,  295 

Philadelphia  (Pennsylvania),  suburb  of, 
230 

Pike  County   (Missouri),  prices  in,  5 

Pioneer  banks,  functions  of.   54-57 

Pioneers,  lack  of  money  among,  2,   3 

Platte  Valley  Bank,  incorporation  of,  62 ; 
value  of  notes  of.  64 

Polk  County,  District  Court  of,  case  tried 
in,  65 

"Poor  Richard  and  his  Brother",  com- 
munication by,   3 

Popular  attitude  toward  banks,  change  in, 
351-353 

Population  of  Iowa,  growth  of,  45,  353 

Pork,  price  of,  4 

Post  notes,  redemption  of,  18;  issue  of, 
386 

Postal  savings  banks,  opposition  of  bank- 
ers to,  304;   demand  for,   329;   effect  of, 


on  business,   330;   interest  paid  by,  330; 
business  of,    330,   331,    332;   number  of, 
331;    depositors  in,   332 
Postal  savings  funds,  deposits  for,  152,  158 
Postal  savings  law,  passage  of,   329 
Postal  savings  system,   opposition   of   bank- 
ers to.   330 
Potatoes,  production  of,  in  Iowa,  46 
Potter,  E.  G.,  appointment  of,  as  bank  com- 
missioner, 79 
Potter,    L.   F.,   office   of,    in    Iowa    Bankers 

Association,    370 
President  of   State   Bank  of   Iowa,   election 
of,    102;    duties    of,    103;    compensation 
of,    103 
Presidents    of    Iowa    Bankers    Association, 

list  of.    370 
Price,    Hiram,    description    by,    of   issue   of 
scrip,   67,   68 ;   design  for  bank  notes  se- 
lected  by,   98 ;   burning  of  old    notes   de- 
scribed  by,   99;    presence  of,    at  meeting 
of  Board  of  Directors,   102;   election  of, 
as   President   of    State    Bank,    102,    103; 
financial  assistance  of,  during  Civil  War, 
108;  record  of  meeting  signed  by,  118 
Prices,  examples  of,  4,  5,  46 
Primary  functions  of  banks,  discussion  of, 

333-341 
Primary  roads,  improvements  of,   328,   348 
Private  bankers,  bonds  required  of,   167 
Private  banking,    history  of,   in   early   Mis- 
sissippi  River   towns,    49-51 
Private    banks,    establishment    of,    in    early 
Iowa,  48-54,    133,    134;   credit  given  by, 
92;   number  of,   92,   132,  133,   153,   163 

164,  169,  170,  171,  181;  account  of, 
132-135,  163-168;  data  from,  133;  capi- 
tal of,  133,  174;  advantages  of,  134 
135,  166;  size  of,  163;  need  of  State 
supervision  over,  163,  165,  166,  167 
development    of,     163-168;     failures     of 

165,  179,  180;  restrictions  on  names  of 
168;  prohibition  of  new,  201,  202,  203 
380;  farm  mortgages  held  by,  275;  de 
posits  in,  334;  interest  paid  by,  335;  di 
vidends  of,    357,   358;   definition  of,   405 

Profits  of  banks,  amount  of.  for  branches 
of  State  Bank,  121123;  distribution  of, 
by  building  and  loan  associations,  239- 
241  ;    data   on.    356-359 

Profits  of  building  and  loan  associations, 
division  of.  241,  242,  243,  244 

Protective  service  of  Iowa  Bankers  Asso- 
ciation,  374-377 

Public  debt,  amount  of.  in  Iowa,  326 

Public  improvements,  interest  of  bankers 
in,  349 


INDEX 


4r33 


Public  we^are,  activities  of  Iowa  Bankers 
Association  for,   382 

Publicity  for  banks,   359-361 

Pusey,  W.  H.  M.,  bank  conditions  de- 
scribed by,  60 

Quigley,  Mr.,  mention  of,  25 
Quinton,    Richard,   opposition   of,    to    banks, 
38 

Railroad,  first,   in  Iowa,  46 

Rand  McNally  and  Company,  statistics  of 
banks,    given    by,    169 

Real  estate,  owning  of,  by  banks,  93,  130; 
loans  on,  134,  146,  223,  225,  276,  277, 
305 ;  investments  in,  by  savings  banks, 
140,  156;  use  of,  as  security,  by  build- 
ing and  loan  associations,  245,  246,  247 

Real  estate  business,  relation  of  early  banks 
to,    54,    55 

"Red  dog"  money,   6,  74,   128 

"Red-horse"  currency,   60 

Redfield,  F.  G.,  position  of,  as  treasurer  of 
Iowa  Farm  Credit  Corporation,  317 

Rediscounts,  amount  of,  214,  215;  privi- 
lege of,   218,   223,   317,   341 

Remey,  John  T.,  office  of,  in  Iowa  Bankers 
Association,    370 

"Report  of  the  Select  Committee  of  the 
States  on  the  Currency",  discussion  of,  7 

Reports  from  banks,  number  of,  183,  184, 
185,  186,  187,  188,  189;  penalty  for 
not  furnishing,   187 

Republicans,  number  of,  in  convention  ii\ 
1857,  71;  financial  support  offered  by, 
108;  opposition  of,  to  Federal  Reserve 
Act  205,  206;  postal  savings  law  en- 
acted by,  329;  opposition  of,  to  deposit 
insurance,  424 

Reserve,  requirements  of,  for  State  banks, 
152,  153;  requirements  of,  for  savings 
banks,  157;  amount  of.  214;  interest  on. 
222  ;  requirements  of,  for  national  banks, 
225;  bill  concerning,  380  (see  also  Cash 
reserve) 

Reserve  cities,  deposits  of  banks  in,  207, 
208;  profits  of  banks  in,   356,  357 

Retrenchment  and  Reform,  Committee  on, 
appeal  to,  relative  to  bank  charter,  200, 
201.  202 

Reynolds,  Arthur,  Federal  Reserve  Act  sup- 
ported by,  206;  office  of,  in  American 
Bankers   Association,    374 

Reynolds,  George,  office  of,  in  American 
Bankers  Association,   374 

Roads,  bonds  for,  326,  328;  interest  of 
bankers  in,   348,   380 


Rock  Island  (Illinois),  meeting  of  bankers 
at,   367 

Uockiugham,  flour  mill  at,  66 

Rogers,  Thomas,  opposition  of,  to  Miners' 
Bank,   24;   i)etition  presented  by,   28 

Root,  A.  C,  early  bank  of,  51 

IJupert,  Benjamin,  appointment  of,  as  trus- 
tee of  Miners'   Bank,   :!1 

Rural  credit  law,  proposed,  287,  288 

Rural  credits,  proposed  system  of,  287,  340 

Russell,  John,  report  concerning  banks 
published   by,    186 

Safety  deposit   business,    343,   344 

Safety  fund,  use  of,  in  State  Bank 
branches,   94,    95 

St.  Joseph  Cattle  Loan  Company,  business 
of,  321 

St.  Louis   (Missouri),  prices  at,  4,  5 

St.  Louis  Cattle  Loan  Company,  business 
of,   321 

St.  Louis  Gas  Light  Company,  purchase  of 
Miners'  Bank  by,  23,  24;  bankruptcy 
of,    26 

Sanford.   H.  W.,  banking  activity  of,   55 

Saunders,  R.  C,  employment  of,  in  pro- 
tective  work,    375,    377 

"Savings",  restriction  on  use  of,  in  bank 
titles,    141,    162,    165 

Savings  accounts,  encouragement  of,  by 
national  banks.  225 

Savings  and  loan  associations,  origin  of, 
229,   230 

Savings  banks,  capital  of,  80,  138,  155, 
156,  158,  159,  174,  380;  number  of, 
137,  141,  142,  146,  153,  154,  155,  156, 
159,  160,  164,  170,  171;  establishment 
of,  138;  laws  concerning,  138-142,  155, 
156,  157,  158,  159,  160;  deposits  in, 
139,  334,  335;  government  of,  139,  157, 
158,  159;  investments  permitted  to,  140; 
supervision  over,  141;  statements  from, 
141;  reorganization  of,  143;  assets  of, 
146,  147,  172,  173;  types  of,  154,  155; 
development  of,  154-160;  advantages  of, 
155,  156;  investment  of  funds  of,  156; 
property  owned  by,  156,  157;  cash  re- 
serve fund  of,  157;  withdrawal  of  de- 
posits from,  157;  replacement  of  capital 
stock  of,  158;  surplus  funds  of,  158; 
directors  of,  159;  limitations  on  loans 
by,  159;  size  of,  160;  similarity  of  trust 
companies  to,  162 ;  statistics  on  resources 
of,  169;  reports  required  from,  186, 
187;  right  of  joining  Federal  reserve 
system  given  to,  208;  loans  of,  214;  re- 
serves  (5f,    214,    217;    relation    of,    to   na- 


454 


HISTORY  OF  BANKING  IN  IOWA 


lional  banks,  276;  real  estate  invest- 
ineiits  of,  377;  purchase  of  mortgages 
by,  282,  28:),  286;  investments  of,  in 
finance  corporations,  :!15;  interest  paid 
by,  3:i5;  dividends  of,  ;!57,  :!58 

Schanke  and  Comi)any  (Mason  City),  busi- 
ness of,    326,    328,   422 

Scholte  and  Grant,   early  bank  of,   51 

School  districts,  debts  of,   326 

School  fund,  legal  tender  for,   113 

Schools,   interest  of  bankers  in,   348 

Scott  County,  attempt  to  establish  bank 
in,  35;   corporation  in,   66 

Scrip,  use  of,  for  money,   65-68 

Secondary  banking  functions  of  banks, 
341-344 

Secretary  of  Iowa  Bankers  Association, 
election  of,  363;  salary  of,  364;  duties 
of,  368;  permanent  service  of,  369;  of- 
fices for,   369;   names  of,    371 

Secretary  of  State,  filing  of  articles  of  in- 
corporation with,  136,  137,  151;  report 
of  banks  to,   186 

Secretary  of  the  State  Bank  of  Iowa,  elec- 
tion of,  102,  103;  duties  of,  104;  com- 
pensation  of,    104 

Serial  plan  of  issuing  shares,   237,  238,  239 

.Settlers,   arrival  of,  in   Iowa,    1,   4 

Seventh  Legislative  Assembly,  repeal  of 
charter  of  Miners'  Bank  voted  by,  30- 
34;  attitude  of,  toward  banks,  35 

Shade,  Chas.,  office  of,  in  Iowa  Bankers 
Association,   370 

Sliambaugh,  Benj.  F.,  editor's  introduction 
by,    VII ;    acknowledgment   to,    xii 

Shareholders,  liability  of,  139;  right  of,  to 
vote,    254 

Shaw,   Leslie  M.,  mortgage  sales  by,  283 

Shawneetown  (Illinois),  branch  bank  at, 
400 

Sheep,   prices  of,   5 

Sherman,  Buren  R.,  recommendation  of, 
concerning  private  banks,  163,  165;  rec- 
ommendation of,  concerning  banking  de- 
jjartment,    197 

Sherman,  Hoyt,  history  of  early  banks 
given  by,  49,  55,  56,  59 ;  banking  in- 
terests of,  62 ;  appointment  of,  on  Board 
of  Directors  of  State  Bank,  86;  design 
for  bank  notes  selected  by,  98 ;  pres- 
ence of,  at  meeting  of  Board  of  Direc- 
tors, 102 ;  election  of,  as  secretary  pro 
tem  of  State  Bank,  102  ;  sketch  of  busi- 
ness career  of,   390 

Sherman,  Hoyt,  and  Company,  eai-ly  bank 
of,   52 


Sherman,  John,  influence  of,  in  adoption 
of   national   banking  act,    129 

Shields,  .John  G.,  appointment  of,  as  trus- 
tee of  Miners'   Bank,   31 

".Shinplasters",  dissatisfaction  with,  97, 
128 

Silver,   coins  made  of,   6 

Silverware,  storage  of,  343 

Sioux  City,  branch  of  Greene  and  Weare 
bank  at,  52;  land  office  at,  53,  275; 
banks  at,  53,  54,  55;  offer  of  banks  in, 
for  deposits,  56 ;  circulation  of  bank 
notes  of,  64 ;  application  from,  for 
branch  of  State  Bank,  100;  clearing 
house  association  in,  175,  176,  177;  fail- 
ure of  First  National  Bank  at,  177,  178; 
failure  of  Sioux  National  Bank  at,  178; 
reserve  requirements  of  banks  in,  217; 
joint  stock  land  bank  at,  295,  298  ;  prof- 
its of  banks  in,  357;  meeting  of  bank- 
ers at,  370 

Sioux  City  Bond  and  Mortgage  Company, 
mention   of,    421 

Sioux  City  Cattle  Loan  Company,  organi- 
zation of,  321,  322;  business  of,  322, 
323,  325;  mention  of,  421 

Sioux  City  Clearing  Hoxise,  organization 
of.    175;   exchanges  in,    176,    177 

Sixth  Legislative  Assembly,  opposition  of, 
to   Miners'   Bank,   27-29,    33 

Slagle,  C.  W.,  appointment  of.  as  bank 
commissioner,  84 ;  presence  of,  at  meet- 
ing of  bank  commissioners,   99 

Smith,  S.  F.,  office  of,  in  Iowa  Bankers 
Association,    370 

Smith,  W.  T.,  presence  of,  at  meeting  of 
Board  of  Directors,  102 ;  financial  sup- 
port offered  by,   108 

Social  features  of  Iowa  Bankers  Associa- 
tion,   366-368 

Solomon,  Daniel  H.,  motion  by,   74 

"Some  Mistakes  in  Banking",  address  on. 
365 

South  Dakota,  law  of,  relative  to  private 
banks,  167;  debenture  companies  in, 
278,  279;  losses  of  farmers  in,  286; 
placing  of,  in  eighth  Federal  farm  loan 
district,   289;   cattle  loans  in,   321,   325 

Southern   States,   bonds  of.   58,   95 

Spanish  coins,   use  of,  in  Iowa,  6,  60,   61 

.Special  election,  vote  at,  on  bank  bill,  75, 
84 

Special  types  of  banking,    306-332 

Specie,  lack  of,  5,  6 ;  amount  of,  in  Miners' 
Bank,  17,  18,  19,  20;  payments  in,  17, 
18,  337,  338;  requirement  of,  in  land 
sales,     55;    reserve    of,    in    branches    of 


INDEX 


455 


Slate  Bank,  95,  96,  119,  120;  require- 
ment of,  for  taxes,  112  (see  also  Specie 
payments) 

Specie   Circular   of   183C,    55 

Specie  payments,  suspension  of,  by  Miners' 
Bank,  20,  21,  22,  23,  24,  25,  28,  29, 
30,  31,  33;  suspension  of,  96,  113;  sub- 
stitutions for,   110,   111 

Specie  Resumption  Act,  passage  of,  144 

Speculation,    increase  in,    2 

Spirit  Lake,  bankers'  convention  at,  351, 
363,   370 

"Spite  banks",  denial  of  charters  to,  200, 
201 

Springer,  Francis,  letter  to,  concerning 
Miners'   Bank,    26 

"State",  restriction  on  use  of,  in  titles  of 
banks,   150,  151,   160,    162,   165 

State  bank,  proposal  for,  36,  37,  71,  72, 
73,    75 

State  Bank  notes,  high  standing  of,  111- 
114;  status  of,  as  legal  tender,  112,  113; 
hoarding  of,  113;  reduction  of,  116, 
117;    burning  of,    116,   117,    118 

State  Bank  of  Iowa,  branches  of,  50,  51, 
52,  64,  85,  87,  88,  89,  90,  91,  92,  93, 
99,  100,  101,  104,  105,  126,  134,  397; 
president  of,  67;  recommendation  for, 
71;  objection  to  name  of,  73;  interest  of 
S.  J.  Kirkwood  in,  82 ;  authorization  of, 
83,  84;  experience  of  other  States  used 
as  guide  for,  83,  84;  history  of,  83-125; 
vote  on,  at  popular  election,  84;  com- 
missioners of,  84,  85;  provisions  of 
charter  of,  84-99;  liability  of  stock- 
holders of,  88;  reports  of,  90;  in- 
terest rates  of,  91;  notes  of,  94-99,  104, 
105,  110,  111-118;  burning  of  notes  of, 
98,  116,  117,  118;  organization  of,  99- 
106;  first  meeting  of  Board  of  Directors 
of,  101,  102,  103;  officers  of,  102,  103, 
104,  105,  106;  supervision  of  branches 
of,  106,  107;  aid  of,  to  State,  during 
Civil  War,  108,  109;  purchase  of  State 
and  Federal  bonds  by,  109;  deposits  of 
State  money  in,  109,  110;  financial 
statement  of,  110,  119,  120;  relation  of, 
to  national  system,  114,  115,  116,  118; 
retirement  of  circulation  of,  114-118; 
closing  of  business  of,  117,  118,  135; 
profits  of,  121-123;  summary  of  work  of, 
123,  124,  125;  freedom  of,  from  political 
difficulties,  124,  125;  success  of,  127; 
reference  to,  133;  real  estate  security 
not  accepted  by,  267,  275,  305 

State  banking  laws,   lack   of,    135,    136 

State   banks,    quality   of   circulation    of,    2; 


number  of,  2,  135,  137,  146,  153,  154, 
164,  170,  3  71;  tax  on  notes  of,  82,  114, 
115;  system  of,  126-142;  Iowa  laws 
concerning,  135,  136,143,150,151,152, 
153,  154;  establishment  and  status  of, 
135-138;  reports  by,  136,  137,  184,  185, 
186,  187,  188,  189;  provisions  concern- 
ing, in  Code  of  1873,  137,  138;  capital 
of,  137,  146,  151,  152,  153,  154,  155. 
156,  174,  427;  comparison  of,  with  na- 
tional banks,  146,  147,  222 ;  assets  of, 
in  Iowa,  146,  147,  427;  titles  of,  150, 
151;  development  of,  150-154;  filing  of 
articles  of  incorporation  by,  151 ;  state- 
ments from,  151;  government  of,  151, 
152;  loans  by,  151,  214;  cash  reserve 
of,  152,  153,  214,  217;  relation  of,  with 
Federal  reserve  system,  152,  207,  208, 
209,  211,  217,  218,  219,  220,  221,  222; 
number  of  directors  of,  159;  statistics 
on  resources  of,  169,  172,  173;  failures 
of,  179;  examination  of,  192,  193,  194, 
195,  196;  real  estate  investments  of, 
277;  investment  of,  in  finance  corpora- 
lions,  315;  deposits  in,  334;  interest 
paid  by,  335;   dividends  of,  357,   358 

State  Central  Savings  Bank  of  Keokuk, 
organization   of,    118 

State  Historical  Society  of  Iowa,  scrip  in 
possession  of,  65;  fractional  currency 
belonging  to,    97 

State  National  Bank  of  Keokuk,  organiza- 
tion of,  118 

State  rural  credit  law,  proposal  for,  287, 
288 

State  University  of  Iowa,  income  tax  con- 
ference held  by,  346,  382 

Statehood,  movement  for,   36 

Stevens,  Andrew  J.,  money  circulated  by, 
64,   65 

Stevens,  A.  J.,  and  Company,  banking  in- 
terests of,  65;  responsibility  of,  for  bank 
notes,   65 

Stevens,  L.  E.,  office  of,  in  Iowa  Bankers 
Association,    370 

Stimson,  Mr.,  digest  by,  135 

Stock,  payment  for  shares  of,  in  building 
and   loan   associations,    248 

Stock,   live    (see  Live  stock) 

Stock,  State  Bank,  distribution  of,  87; 
transferability  of,   88 

Stock  quarantine,  need  of  money  during, 
227 

Stock  savings  banks,  plan  of,  154;  number 
of,   155 

Stockholders,-  liability   of,    29,    40,    75,    76, 


456 


HISTORY  OF  BANKING  IN  IOWA 


78,  88,   150,   152,   160,  295;   number  of, 
355,  356 

Stocks,  deposit  of,  as  security,  77,  80; 
fraudulent,  213,  342 

Stone.  Mr.,  work  of,  for  Muscatine  Branch 
of  State  Bank,   106 

Storm  Lake,  failure  of  First  National  Bank 
at.   178;  meeting  of  bankers  at,  370 

Stuart,  robbery  of  bank  at,  376 

"Stump-tail"  currency,   60,   128 

Sturges,  Solomon,  and  Son,  closing  of  ac- 
counts with,  107 

Suudblad,  John,  killing  of.  376;  fund  for 
family  of,  376 

Supervision  of  banking,  183-203 

Supreme  Court  of  Iowa,  decision  of,  con- 
cerning Miners'  Bank,  32 ;  decision  of, 
relative  to  negotiable  notes,  381 

Supreme  Court  of  the  United  States,  de- 
cision of,  relative  to  trust  company  pow- 
ers. 224;  decision  of,  relative  to  tax  ex- 
emption of  Federal  farm  loan  system, 
300,  301,  302;  tax  exemption  case  de- 
cided  by,    300,    305 

Surplus  fund,   authorization  of,   158 

"Swindling",  motion  to  substitute,  for 
"banking",   80 

Tables,  119,  120,  122,  149,  150,  171,  173, 
174.  176,  178,  232,  268,  271,  272,  307, 
311,   357,   370 

Taft,  William  H.,  postal  savings  law  signed 
by,   329 

Tammany  Hall,   meeting  at,   385 

Tarbell.  Mr.,  verdict  for,  65 

Taxation,  reports  for  purposes  of,  133; 
amount  of,  for  building  and  loan  asso- 
ciations. 264.  265;  exemption  of  bonds 
of  Federal  land  banks  from,  292;  ex- 
emption of  joint  stock  land  bank  bonds 
from,  297,  298;  exemption  of  Federal 
farm  loan  system  from.  298-303 

Taxes,  activities  of  banks  in  collection  of, 
56,  346;  specie  required  for,  112;  legal 
tender  for,   112,   113 

Taylor,  Richards  and  Burden,  early  bank 
of,    50 

Tekama  (Nebraska),  Bank  of,  incorpora- 
tion of,   64 

Tenants,  farms  operated  by,  271,  272.  273 

Terminating  plan  of  issuing  shares,  descrip- 
tion  of,  237,   238,   239 

Texas,  farm  loan  associations  in,  294; 
farm  loans  in.  303 ;  live  stock  produc- 
tion in,  320;  organization  of  bankers  in, 
371;   banks  prohibited  by,   390 


Thirty-seventh  General  Assembly,  banking 
department  created  by,   197 

Thomas,  E.  H.,  and  Company,  early  bank 
of,   51 

Thompson's  Bank-Note  Reporter,  publica- 
tion of.   59 

Thrift,   inculcating   habit   of,    261,    262 

Time  lock  expert,  employment  of,  377,   378 

Tipton,  early  bank  in,  53 

Titus,  G.  M.,  meeting  called  by,  280 

Tobacco,   price  of,   5 

Toledo   (Ohio),  meeting  at,  264 

Towner,  H.  M.,  opposition  of,  to  Federal 
Reserve  Act,   206 

Towns,  number  of  banks  in,  354 

Township  scrip,  use  of,  65,  66 

Toy,  James  F.,  opinion  of,  concerning  joint 
stock  land  banks,   298,   299 

Trade  acceptances,  use  of,   226,   309,   339 

Treasurer  of  the  United  States,  deposit  of 
securities  with,  152,  158;  reports  to,  184 

Treasury,  Secretary  of  the,  membership  of, 
in  Federal  Farm  Loan  Board,  288;  stock 
subscribed   by,    289 

Treasury  Department,  currency  bureau  in, 
129;  home  bureau  in,  264;  purchase  of 
farm  loan  bonds  by.  300,  301 

Treasury  notes,  making  of,  legal  tender, 
110,   113 

Tremain,  G.  L.,  money  borrowed  by,  55; 
address  by,  324,  351 ;  tribute  to,  363 ; 
death  of.  363;  office  of,  in  Iowa  Bankers 
Association,    363,    370 

Troops,  expenses  of,  during  Civil  War,  108 

"Trust",  use  of,  in  name  of  corporation,  162 

Trust  companies,  assets  of.  in  Iowa,  147; 
statistics  on.  in  Iowa.  173;  right  to  join 
Federal  reserve  system  given  to,  208 ; 
relation  of.  to  national  banks,  276;  in- 
vestments of.  in  finance  corporations, 
315;  deposits  in,  334  (see  also  Loan  and 
trust  companies) 

Trust  company  powers,  extension  of,  to  na- 
tional banks.   224,  225 

Trust   departments,   establishment   of,    343 

Tuthill.  W.  H..  early  bank  of,   53 

Union  BuUding  Association  (Greenwich, 
England),  establishment  of,  229,  230 

United  Cattle  Loan  and  Live  Stock  Com- 
pany  (Des  Moines),  mention  of,  421 

United  States,  number  of  State  banks  in, 
135;  building  and  loan  associations  in, 
230 

United  States  League  of  Local  Building 
and  Loan  Associations,  meeting  of,   233; 


INDEX 


457 


organization  of,  263 ;  home  bureau  spon- 
sored by,  264 
United  States  Supreme  Court  (see  Supreme 

Court  of  the  United   States) 
Usury,  provision  concerning,   256 
Utah,  law  of,  relative  to  private  banks,  167 

Vandalia    (Illinois),   bank   at,   400 
Van  Valkenberg,  A.   S.,  decision  of  tax  ex- 
emption case  by,    300 
Vaults,  care  of  valuables  in,  343,   344 
Vermont,  sale  of  mortgages  in,  283,  286 
Vice    President    of    State    Bank    of    Iowa, 

duties   of,    103,    104 
Viele,   S.  D.,   State  Bank  notes  burned  by, 
116;    service  of,   in   closing   State   Bank, 
117 
Vigilance  committees,  375 
Vinton,  circulation  of  bank  notes  at,  64 
Virginia,    bank   notes  of,    59,    60,    128 

Wage  earners,  need  of,  for  loans,  306,  307 

Wallard,   Mr.,  mention  of,   25 

Walworth,  George  H.,  attack  on  Williams 
by,   27 

Wapello,  application  from,  for  branch  of 
State  Bank,    100 

Wapello  scrip,   samples  of,   65 

Waples,  F.  C,  mention  of,  25;  list  fur- 
nished by,   281 

War  activities  of  banks,   349,   350 

War  Finance  Corporation,  support  of,  by 
bankers,  381 

War  of  1812,  land  warrants  to  soldiers  of, 
54,    284 

Ward  and  Bryan,  early  bank  of,   52 

Warehouses,    bonding    of,    316 

Warner,  Frank,  position  of,  as  Secretary 
of  Iowa  Farm  Credit  Corporation,  317; 
election  of,  as  Secretary  of  Iowa  Bank- 
ers  Association,   371 

Warrants,   marketing   of,    109 

Washington,  early  bank  in,  53;  application 
from,  for  branch  of  State  Bank,  99, 
100;   branch  of  State  Bank  at,   101 

Washington  (D.  C),  gold-settlement  fund 
kept  at,  219 

Washington  Branch  of  State  Bank,  organi- 
zation of,  101;  conversion  of,  into  na- 
tional bank,  118;  profits  of,  122 

Waterloo,  early  banks  in,  53 ;  application 
from,  for  branch  of  State  Bank,  100, 
106;  clearing  house  association  in,  175, 
176;  building  and  loan  associations  at, 
243,  246,  250;  meeting  of  bankers  at, 
263,    367,    370,    422;    statistics   concern- 


ing Morris  Plan   company   at,   307,   311, 
312 
Waterloo    Building    and    Loan    Association, 
distribution    of    profits    of,     240;     with- 
drawal of  members  from,  242,  243 ;  loans 
by,  246 
Wealth,   amount  of,  in  Iowa,   353 
Weare,  George,  description  of  bank  of,  53, 

54 
Weare,  John,  bank  of,  53,   54 
Weare,  John,  Jr.,  trip  of,  to  Fort  Dodge,  55 
Weare,    Finch,    and    Company,    early    bank 

of,   52 
Weaver,    James    B.,    election    of,    to    Con- 
gress,    145;     nomination    of,    for    Presi- 
dent,   145 
Webber,  J.  F.,  meeting  called  by,   280 
Weed,   Chester,   presence  of,    at  meeting  of 
Board    of    Directors,    102;    election    of, 
as   President  of    State   Bank,    102;    diffi- 
culty of,  over  specie  payments,  112 
Weeks,    John,     Federal    Reserve    Act    sup- 
ported by,  209 
Weiser,    C.    J.,    Investment    Banker     (De- 
corah),  mention  of,  422 
West,  description  of  money  in,  58-69,  128; 

national  banks  in,   131 
West    of    Scotland,     American    Investment 

Company,   Limited,  operation  of,  279 
West  Union,  bank  case  appealed  from,  201 
Western  Exchange,  Fire  and  Marine  Insur- 
ance Company,  banking  activities  of,  61, 
62 
Western    Stage    Company,    scrip   issued    by, 

68 
Wheat,    price   of,    4,    5;    production   of,    in 

Iowa,  46 
Whigs,    attitude   of,    toward    United    States 
Bank,   1,   7;   attitude  of,   toward  Miners' 
Bank,  33,  34;  attitude  of,  toward  banks. 
36,   39,   42,  43,  44 
White-Phillips  Company   (Davenport),  men- 
tion of,   422 
Whiting,   Timothy,   presence  of,   at  meeting 

of  Board  of  Directors,  102 
Whitney,    N.   R.,    work   of   bankers   in   sale 

of  war  bonds  described  by,  350 
"Wild  cat"  banking,  evils  of,  47,  59 
'Wild  cat"  money,  6,  74,  113,   114,  128 
Williams,     Elias    H.,     appointment    of,    on 

Board  of  Directors  of  State  Bank,  86 
Williams,   Henn,  and  Company,  early  bank 

of,    53 
Williams,    Jesse,    testimony    of,    in    legisla- 
tive bribery  case,  26;  attack  on,  27;  loan 
secured  by,   388 
Wilson,  Judge,  trustees  appointed  by,  31 


458 


HISTORY  OF  BANKING  IN  IOWA 


Wilsou,  Woodrow,  inauguration  of,  205; 
Federal  reserve  system  supported  by,  211 

Wisconsin,  banking  law  of,  58,  81,  82; 
notes  of,  59,  60,  128;  purchase  of  mort- 
gages in,  283;  secretary  of  bankers  asso- 
ciation in,  369;  prohibition  of  banks  in, 
390 

Wisconsin,  Territory  of,  application  to  leg- 
islature of,  for  bank  charter,  10;  in- 
vestigation of  Miners'  Bank  by,  14-19 ; 
adjournment  of  legislature  of,  19 


Women,  presence  of,  at  meetings  of  Iowa 
Bankers  Association,  oGG 

Wool,    loans   on,    316 

World  War,  effect  of,  on  banking  re- 
sources, 169,  181,  210,  211;  benefits  of 
Federal  reserve  system  during.  227,  228; 
services  of  bankers  during,   349,  350 

Wyoming,  placing  of,  in  eighth  Federal 
farm  loan  district,  289;  interest  rates 
in,   303,   304;   cattle  loans  in,   321,  325 

Yeomans,  S.  P.,  land  office  in  charge  of,  54 


THIS  BOOK  XSB^.gy^w'-"''""'^ 
^N  INITIAL  F^, ^u^-o  S 

^  V.  .«=QESSED  FOR  P^'^^  !:^c  PENAUTY 
WIUU  BE  ^S^^^^^THE  DATE  DUE.  ^J^/JoURTH 
THIS  BOOK  ON  THE  ^^^^^  O'lJ"  ^tS  DAY 
WIUU  INCREASE  TO         ^^    ^^^    SEVENTH 

DAY     AND    TO     S1-"  ____== 

OVERDUE. 


I^l00m-7,'39(402s) 


TU    U007J 


GENERAL  LIBRARY  -  U.C.  BERKELE 

I 


BaDoaT7«=jfls 


«S£'9t^T^« 


491501 


UNIVERSITY  OF  CALIFORNIA  LIBRARY 


.?• 


